Things seem to be going south for RLX Technology Inc. (NYSE: RLX). The company has been served with a class-action lawsuit filed by Glancy Prongay & Murray LLP on behalf of investors. The Leading Securities Fraud Law Firm stepped out to investigate a possible violation of the federal securities laws by RLX Technology.
The company’s problems began earlier in the year when China’s Ministry of Industry and Information Technology confirmed the regulation of e-cigarettes and new tobacco products. The result was a massive decline in RLX’s share price with $9.31, or 48%, and as of March 22, 2021, the cost per share was $10.15. The investors did not take this kindly, and the reason they have turned their guns blazing on the company.
They perhaps feel betrayed given that RLX Technology had in January 2021 sold approximately 116.5 million American Depositary Shares through an initial public offering and at $12 per ADS, raising nearly $1.4 billion in gross earnings.
But RLX purports to be the “No. 1 branded e-vapour Company in China
E-cigarette use is highest in China, Europe, and the US. The rise was thought to be as a result of their low cost compared to tobacco. Additionally, e-cigarettes are reportedly safer. On the other hand, China manufactures 90% of the world’s e-cigarettes, making it the top manufacturing base for vaping products.
However, despite vaping coming under regulatory scrutiny in China and the presence of the lawsuit, Beijing-based RLX purports to be the “No. 1 branded e-vapour Company in China and is reportedly a relevant market player. Year in year out, the company founded in 2018 has enjoyed massive growth, engaging in critical activities in the e-vapor industry such as scientific research, product and technology development, supply chain management, and offline distribution.
Nonetheless, success has not just come in quickly. The company says it spends quite a considerable chunk of money selling and marketing. Meanwhile, it remains to be seen the direction the lawsuit will take and whether or not it will have any negative impact on its sales growth.