Why RLX Technology Shares Plunged 46% Today

What happened 

Shares of RLX Technology (NYSE:RLX), a manufacturer of vaping products, fell as much as 46% in trading on Monday after reports came out that China will put restrictions on e-cigarettes and other tobacco products. At 1 p.m. EDT today, shares were still down 43.6% for the day. 

So what

The Global Times, a Chinese newspaper, said the government is looking to change its laws to allow regulation of e-cigarettes and other new tobacco products.

Person smoking an e-cig in a dark room.

Image source: Getty Images.

This won’t necessarily have a huge negative impact on RLX Technology’s business, but the prospect of more regulation isn’t seen as good news by investors. And that’s why the stock is down today. 

Now what

RLX was already a fairly speculative stock with a huge market cap of $16.9 billion and very little profit. And with the stock cratering after its IPO, the momentum is gone. Earnings are coming out later this week, and management will have to tell investors just how big the impact of these regulations could be and where RLX will be as a growth stock in the future. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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View more information: https://www.fool.com/investing/2021/03/22/why-rlx-technologys-shares-plunged-460-today/

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