Relx Sued For Not Mentioning Risk of Tightened Chinese Laws

A Relx shareholder has filed a lawsuit in the US against the Chinese e-cig manufacturer, accusing the company of not taking into account imminent Chinese regulations when applying for the US initial public offering (IPO) in October 2020.

Diane Caruana

July 23, 2021

The class action lawsuit was initiated earlier this month in the US District Court for the Southern District of New York, by Investor Alex Garnett, who bought 300 shares at $27.87. He said that he and other investors “sustained substantial damages in connection with their purchases of shares” in RLX Technology, which is one of the biggest manufacturers, distributors and sellers of vaping products in China

According to an article by ECigIntelligence, Garnett accused RLX of not taking into account the aim of Chinese regulators to tighten the regulations governing vaping products in the country, in their registration statement for the IPO. “RLX’s discussions of risk factors did not even mention, much less adequately describe the risk posed by, China’s ongoing effort to establish a national standard for e-cigarettes that would bring them into line with ordinary cigarette regulations,” reads the complaint, which calls for a jury trial.

Imminent vape rules amendments

Chinese authorities said local vape laws will be updated to suit new situations that have emerged in the supervision of new tobacco products such as e-cigarettes.

Earlier this year, a statement by the Ministry of Industry and Information Technology (MIIT) announced the addition of a clause to the Detailed Rules for the Implementation of the Tobacco Patent Sales Law of China as Article 65, “.. regulations on e-cigarettes and other new tobacco products shall be implemented with reference to the relevant provisions on cigarettes in the regulations.”

Following the announcement, the stock price of RLX Technology Inc., dropped by more than 24% or $14.70 at 9:55 GMT in pre-market trading on the US market. Its stock price closed at $19.46 on Friday, with a market value of $30.2 billion.

The new regulations will affect the production and operation of e-cigarettes, ensure quality and safety standards and set in place advertising guidelines.

Together with the State Tobacco Monopoly Administration, the MIIT said that current rules would be updated to suit new situations that have emerged in the supervision of new tobacco products such as e-cigarettes. “The revision will clarify the legal basis for the supervision and administration of e-cigarettes and other new types of tobacco products. It will be coordinated with the Law of the People’s Republic of China on the Protection of Minors and other laws and regulations.”