Regal's Phil King plays a blinder

There really needs to be a series of Gogglebox where instead of filming common layabouts at home, the cameras point back at market animals from their Bloomberg screens. I would pay good money to see the unfiltered reactions on Monday morning when ASX-and Nasdaq-listed biotech Opthea announced that the phase 3 trial of its treatment for macular degeneration (AKA old-age blindness) had bombed.

The bad news was compounded by Opthea's usurious funding agreement with the health sciences arm of Carlyle Group, the terms of which nobody had paid any attention to when it was struck in August 2022. It granted Carlyle security over all of Opthea's assets and upon a variety of negative milestones that have now occurred or are imminent, Opthea must repay Carlyle up to four times the US$170 million it provided. Opthea – with just US$114 million of remaining cash (which now belongs to Carlyle) conceded on Monday that this will have "a material adverse impact on the solvency of the company."

Until its suspension last week, Opthea traded at a $738 million market capitalisation. Its shares have not yet been reinstated, but it will resume trading at a valuation much closer to zero. Welcome to the world of speculative biotechnology, whose binary outcomes are the closest thing in markets to playing roulette.

And there at the top of Opthea's substantial shareholder list is the biggest gambler in Australian equities, Phil King of Regal Funds Management, whose $300 million holding has been vaporised.[[Opthea's shares were trading well north of $1 until late February, when the stock became heavily shorted and fell 38 per cent. The shares were halted at 60c last week pending the announcement of the trial results. Three of Regal's LICs marked the shares down to 20c on Tuesday, but that's an heroic assumption. Opthea is effectively a single drug bet. Two of those closed funds – VGI Partners Global Investments and Regal Asian Investments – didn't actually have any of Regal's Opthea shares in them as at their last portfolio disclosure (June 30, 2024).]] Regal took a substantial holding in Opthea in 2017, apparently on the say-so of former Bell Potter director Michael Sistenich, then an Opthea director.[[Sistenich served on Opthea's board from 2015 to 2023. He is now CEO of Enlitic, in which Regal was a pre-IPO investor.]] After taking the lion's share of an equity placement in June 2024, Regal increased its ownership of Opthea to a heedless 31 per cent.[[Regal even tipped the philanthropic listed investment company, Hearts & Minds, into Opthea. The LIC is Opthea's third-largest shareholder. There's $30 million of its net tangible assets out the window.]]

Thirty-one per cent! It's the sort of equity position Ryan Stokes builds in a deep value play right before shooting management. It's not the sort of position you can trade out of (profitably) – it leaves you dependent on a corporate action. This is balls to the wall territory, evoking another pig for risk: Will Vicars, stuck for a decade with 25 per cent of Zillow, which every year he swears is about to come good.