RLX Technology founder Ying (Kate) Wang has resigned as a member of the audit committee of the company’s board of directors to help RLX comply with the relevant New York Stock Exchange’s listing requirements on audit committees’ independence.
Going forward, the audit committee will be composed entirely of independent directors—Zhenjing Zhu and Youmin Xi—RLX technology announced in press note.
RELX has launched in the Kingdom of Saudi Arabia. The e-cigarette brand is already available in the United Arab Emirates and Kuwait—and has further plans to expand into the wider Middle East and northern Africa (MENA) region this year.
The Kingdom has announced new regulations, similar to those set across Europe, following the standard setup for e-cigarette packaging and labeling, which was introduced in September 2020.
“The MENA region is one of our category’s fastest-growing markets, growing at a rate just short of 10 percent until 2024,” said Fouad Barakat, KSA general manager at RELX International, in a statement. “Saudi Arabia is one of the region’s largest and most prosperous markets, hence the need for any brand to launch there if it wants to thrive and grow bigger.”
There are two products available: RELX Infinity and RELX Nano2.
RLX Technology revenue slowed in the second quarter of 2020 amid uncertainty about the regulatory environment in China.
Net revenues were RMB2.54 billion ($393.6 million), representing an increase of 6 percent from RMB2.4 billion in the first quarter of 2021. The improvement was due primarily to an increase in net revenues from sales to offline distributors, which was mainly attributable to the expansion of the company’s distribution and retail network.
The company believes that the slowdown in quarterly sequential revenue growth was due primarily to external factors, including negative publicity on the vapor industry in the latter half of the second quarter, coupled with the fact that the draft new rules for vapor products announced by China on March 22, 2021, have not been formally confirmed and no new implementation details had been revealed, which had an adverse impact on sales.
The company is also target of a lawsuit by investors who claim RLX Technology overstated its financials and misrepresented potential regulatory risks when it filed the paperwork for its initial public offering in the U.S.
Gross margin was 45.1 percent compared to 46 percent in the first quarter of 2021.
“In the second quarter of 2021, our business continued to develop as we increased our efforts to further improve underage protection and product safety,” said Ying (Kate) Wang, co-founder, chairperson of the board of directors and CEO of RLX Technology, in a statement. “With our strategic focus on technology investment and brand building, we strive to make RELX a trusted brand for adult smokers with state-of-the-art products, industry-leading technologies and scientific advances. Going forward, we will further enhance investments in scientific research, strengthen our distribution and retail network, and improve our supply chain and production capabilities to create more value for our users and shareholders alike.”
RLX hosted an earnings conference call on Aug. 20, 2021. A live and archived webcast of the conference call is available on the company’s investor relations website. A replay of the conference call will be accessible until Aug. 27, 2021.
A group of investors is suing RLX Technology, claiming the Chinese vaping company overstated its financials and misrepresented potential regulatory risks when it filed the paperwork for its initial public offering in the U.S., reports The Wall Street Journal.
Submitted June 9 by shareholder Alex Garnett in the U.S. District Court for the Southern District of New York, the lawsuit alleges RLX’s registration statement from last October omitted the impact of ongoing efforts by Chinese regulators to tighten sales of electronic cigarettes.
Under rules established by the U.S. Securities and Exchange Commission, companies must disclose any known events or uncertainties.
Founded in 2018, Beijing-based RLX went public on the New York Stock Exchange in January. The offering raised $1.39 billion, according to data provider Dealogic. Its stock price fell sharply after Chinese regulators in March proposed treating vapor products like regular cigarettes.
The lawsuit alleges investors purchased RLX shares at artificially inflated prices in part because the company omitted and misrepresented information in the registration statement. As the stock price dropped, RLX investors lost hundreds of millions of dollars, the lawsuit said.
At least two other law firms in recent weeks said they are investigating on behalf of investors to determine whether RLX failed to disclose relevant information to investors. Rosen Law Firm and Bronstein, Gewirtz & Grossman, among others, are reportedly seeking RLX investors who want to join a class-action suit.
RLX on June 2 reported revenue of CNY2.4 billion ($366.1 million) for the quarter ended March 31, up from CNY368.6 million in the prior year period. The company booked a net loss of CNY267 million compared with a profit of CNY12.1 million during the prior year quarter.
The company’s financial statements in recent months have raised eyebrows among accounting experts, who have questioned RLX’s unusually high ratio of cash and securities to total assets, among other issues.
On June 1, Tobacco Reporter published an article explaining how tobacco regulations could change China’s vapor business.
RLX Technology today announced its unaudited financial results for the first quarter ended March 31, 2021. Net revenues were RMB2.4 billion ($366.1 million), up 48.2 percent from RMB1.62 billion in the fourth quarter of 2020. Gross margin was 46 percent compared to 42.9 percent in the fourth quarter of 2020. GAAP net loss was RMB267 million compared with RMB236.7 million in the 2020 fourth quarter. Non-GAAP net income was RMB610.5 million, representing an increase of 45.6 percent from RMB419.3 million in the fourth quarter of 2020.
“2021 began on a solid note, with strong growth in key performance metrics of our business,” said Ying (“Kate”) Wang, co-founder, chair of the board of directors and CEO of RLX Technology, in a press note. “Specifically, our expansion in distribution network fueled a strong sequential growth, further demonstrating sustained user demand for our e-vapor product portfolio.”
“As the go-to brand of e-vapor products in China, we remain dedicated to investing in deepening our scientific research, improving our technology and product development, expanding our distribution network and retail outlets as well as enhancing supply chain and production capabilities.
“In the first quarter, we opened our Quality Lab to further strengthen our quality assurance and control capabilities and started developing our second and third exclusive production plants to enhance our production capabilities. We believe we are well positioned to further capture the growth potential in the e-vapor industry in China,” Wang concluded.
We remain dedicated to investing in deepening our scientific research, improving our technology and product development, expanding our distribution network and retail outlets as well as enhancing supply chain and production capabilities.
“Our robust results in the first quarter of 2021 exemplify our strong capabilities in meeting user demands for reliable, innovative and trustworthy products,” said Chao Lu, chief financial officer who joined the company in February. “Building on rapid revenue growth and continued efforts in improving operating leverage, our gross margin and non-GAAP net margin have remained steady in the first quarter. We will continue to pursue user value creation by enhancing our suite of product offerings and strengthening our brand leadership in the market.”
For the second quarter of 2021, RLX Technology expects net revenues to exceed RMB2.85 billion and expects non-GAAP net income to exceed RMB720 million. The company’s expected GAAP net income will include share-based compensation expenses, which depend on the company’s share price. The company currently also expects gross margin to remain steady.
The Celebrity Net Worth website recently published a profile of RLX Technology Founder Kate Wang, who the publication describes as one of the richest self-made women in the world.
Wang graduated from Jiatong University with a degree in finance in 2005 and took a management trainee job at Proctor & Gamble in Guangzhou. In 2011, she moved to New York City to get her Master of Business Administration degree at Columbia.
After grad school, Wang spent a year at the Beijing office of Bain & Co. She then moved to Uber China, followed by the Chinese ride-sharing service Didi Chuxing, which merged with Uber China in 2016.
In 2017, Wang tried e-cigarettes to help her quit smoking, but she found the Chinese offerings available at the time to be terrible. She saw an opportunity and decided to focus on older smokers who were trying to quit, like her father, who was suffering the health consequences from his two-packs-per-day habit.
Through crowdfunding on JD.com, Wang raised $6 million in seed capital in June 2018, positioning the RLX Technology as a tech startup.
After a little more than a year of operation, RLX had garnered almost half of the largely unregulated domestic vaping market in China.
In January, RLX went public on the New York Stock Exchange and raised $1.4 billion.
However, when Chinese regulators in October 2019 banned internet sales of e-cigarettes to discourage underage vaping, 20 percent of the company’s business evaporated overnight.
Undeterred, RLX started building a physical store presence. In January 2020, RLX opened a flagship store in Shanghai. Today, RLX has more than 5,000 stores in 250 cities in China. The company requires ID and put facial recognition in place to prevent minors from shopping for e-cigarettes in RLX stores. RLX still has more than 60 percent of China’s growing e-cigarette market.
Despite the challenges, RLX’s sales grew 147 percent to $585 million in 2020, up from $19 million in 2018.
In March, however, Chinese regulators revealed a draft of rules that would reclassify e-cigarettes as tobacco products and bring them under the control of the State Tobacco Monopoly Administration (STMA). Such a move would greatly diminish vapor companies’ potential earnings. All tobacco products in China are sold through government-owned stores. In response to the news, the share price of RLX dropped 54 percent—erasing $16 billion from the company’s market cap.
Meanwhile, the U.S. Securities and Exchange Commission announced it would begin enforcing a law that Chinese companies listed on the New York Stock Exchange would have to provide audits or be de-listed.
In the worst-case scenario, Wang would be forced to sell at a price set by China Tobacco (which would likely jeopardize most, if not all, of her profit) and be forced to de-list in the U.S.
The WS-23 cooling agent has limited impact on the experiment animals at the tested dose, according to a study performed by RLX Technology and published in the Journal of Applied Toxicology.
The RLX Technology study showed that there were no deaths in any of WS-23 treated groups in the acute and subacute inhalation studies, with no remarkable changes occurred in body weight, organ weight, hematology and serum biochemistry and no toxic effects in the histopathologic analysis.
It was the first study published on the Science Citation Index (SCI) indexed journal conducted by the Chinese e-cigarette industry.
WS-23 is a well-known artificial synthesis cooling agent widely used in foods, medicines and tobaccos. As a common cooling agent in e-cigarette liquids, WS-23 has led to concerns about the inhalation toxicity with the proliferation of e-cigarettes in recent years. The study shows that at the tested dose level, inhalation of WS-23 will not bring toxic side effects to test animals.
“Product safety has always been RLX’s top concern, and it is also the direction and commitment in our research and development,” said Xingtao Jiang, head of RELX Lab, which is part of RLX Technology, in a statement. Before the study was published, RELX Lab conducted vitro tests to prove the aerosol-containing WS-23 is safe to use in the products.
The China-based vapor company RLX Technology has hired Lu Chao as its chief financial officer, according to people with knowledge of the matter.
Lu, a managing director and head of Asia healthcare investment banking at Citigroup, is expected to join the U.S.-listed e-cigarette maker as soon as March. Lu will help RLX Technology to identify expansion and investment opportunities in the healthcare industry that could apply its vaping technology, said the source, who asked to remain anonymous.
A Princeton University graduate, Lu joined Citigroup in December 2013, according to his LinkedIn profile.
RLX Technology, which is known for its RELX-branded devices, raised about $1.4 billion in an initial public offering in the U.S. earlier this year, according to Bloomberg. Lu was a lead banker on the deal, the source said, as Citigroup and China Renaissance Holdings arranged the offering.
Shares in RLX Technology have risen more than 75 percent since its January debut, giving the company a market value of about $32.7 billion.
RLX Technology is looking to raise as much as $1.17 billion from a U.S. initial public offering, reports Bloomberg.
The Chinese vapor company, known for its RELX-branded devices in China, had earlier considered Hong Kong as a listing venue, but it ultimately opted for the U.S.
Founded in 2018, RLX is China’s largest e-cigarette maker. The vaping industry has boomed in China even as the country banned online sales of e-cigarettes just over a year ago.
China is the world’s largest potential vaping market, with an estimated 286.7 million adult smokers in 2019, RLX said in its prospectus. But vaping products only have a 1.2 percent penetration rate, compared with 32.4 percent in the U.S.
RLX’s revenues increased to CNY2.2 billion ($340 million) in the first nine months of 2020 from CNY1.14 billion a year earlier. It started turning a profit in 2019 and recorded net income of CNY109 million in the nine months to Sept. 2020.
The company plans to price the IPO on Jan. 20 after the U.S. market closes, according to a term sheet. Citigroup and China Renaissance are joint bookrunners for the offering.
Earlier reports suggested the company planned to raise up to $100 million in its IPO.