China based vaporizer specialist RLX technology (NYSE: RLX) made an auspicious debut on the US stock market. After selling for $ 12 per American depositary share (ADS) in its initial public offering, the company’s shares opened at $ 22.34 per ADS on Friday, rising to $ 29.51 at closing.
In its IPO prospectus, RLX claimed to be the “No. 1 branded electronic vapor company in China” with its RELX vaporization product line. The company said its market share was almost 63% in the first three quarters of 2020 and was number 1 in brand recognition in the country.
Like many companies that are entering the stock market recently, RLX is growing rapidly. It posted net revenue of more than 2.20 billion yuan ($ 341 million) in the first three quarters of 2020, almost double the 1.14 billion yuan ($ 176 million) in the same period in 2019.
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Unlike many newcomers, the Chinese company is profitable. Its net profit was 109 million yuan from the first to the third quarter in 2020, up from the previous year’s figure of 97 million yuan.
RLX intends to use about 30% of the estimated US $ 1.35 billion it raised in the IPO for research and development; 25% each should go to strengthen their retail and distribution efforts and to improve their supply chain. And the remainder will be used for general corporate purposes and working capital.
The company currently has only a light presence in the American market, and is facing a particularly scary pair here in Altria (NYSE: MO) with its next generation alternative smoking product IQOS.
On Friday, Altria’s shares more or less moved in conjunction with the modest fall in S&P 500 index. This indicates that investors are not too concerned about their new rival in the stock market.