Please ensure Javascript is enabled for purposes of website accessibility

Why RLX Technology Shares Plunged 46% Today

By Travis Hoium - Updated Mar 22, 2021 at 2:01PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

New regulations in China could hurt its growth prospects.

What happened 

Shares of RLX Technology (RLX 0.00%), 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. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

RLX Technology Inc. Stock Quote
RLX Technology Inc.
$1.87 (0.00%) $0.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/23/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.