- The stock price of RLX Technology Inc. (NYSE: RLX) fell by over 25% pre-market. This is why it happened.
The stock price of RLX Technology Inc. (NYSE: RLX) fell by over 25% pre-market. Investors appear to be responding to a Reuters report that Chinese regulators are planning to bring the rules governing the sales of e-cigarettes and other tobacco products in line with those for regular cigarettes.
The Ministry of Industry and Information Technology (MIIT) and China’s State Tobacco Monopoly Administration had posted online the draft regulations that could negatively impact a fast-growing industry. A couple of years ago, several Chinese e-cigarette companies had emerged in targeting the domestic market after the success of the Juul. RLX Technology had raised $1.4 billion in an IPO in January that that valued the company at $35 billion.
China’s tobacco industry is controlled entirely by a government monopoly. And there are strict controls determining which companies and retailers can produce and sell cigarettes.
Cigarette sales had generated 5.45% of China’s overall tax revenue in 2018. And so industry experts have long expected the state to intervene in the business operations of China’s private e-cigarette companies.
In November 2019, Chinese regulators had forbid e-commerce platforms from selling e-cigarette products online. And this ban curbed the growth of the market. So many brands focused their business toward offline sales.
Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.