As governments impose harsh restrictions, excessive taxes, and even outright vape bans, investors remain willing to gamble that vaping has a future in the consumer marketplace.
The latest example is Shenzhen, China-based vape manufacturer Aspire, which is set to launch an initial public offering (IPO) of 15 million shares. The Global Aspire company will be traded on the U.S. Nasdaq exchange under the symbol ASPG.
Aspire plans to raise $120 million with the sale, with its stock commanding $7-9 a share. According to a press release, the midpoint of that range would result in a market value of $1.3 billion for the company. Tiger Brokers, EF Hutton, TF International, and China Merchants Securities are managing the IPO.
Founded in 2010, Aspire is one of the world’s best-known Chinese vaping manufacturers, with products sold in 30 countries. The company had $82 million in sales last year, and has recently expanded into the U.S. cannabis vaping market with the ISPIRE brand. Aspire has more than 1,300 employees.
Chinese vaping giant Smoore went public last summer, reaching an astonishing $22 billion (U.S.) valuation in less than a week on the Hong Kong Stock Exchange. Smoore’s market capitalization currently stands at more than $33 billion (U.S.), making it the most valuable dedicated vaping business in the world.
RLX Technology, the parent company of Chinese vape brand RELX, followed in January 2021, trading on the New York Stock Exchange. Unlike both Smoore and Aspire, however, RELX’s fortunes depend more on domestic Chinese sales—and the broader future of vaping as a competitive product in China.
China announced on March 23 that vaping products sold in China would eventually come under control of the State Tobacco Monopoly Administration—the Chinese government’s tobacco regulator. China strictly controls its domestic tobacco market through the monopoly administration, which both regulates and runs the government-owned China National Tobacco Corporation—the largest cigarette company in the world.
RLX Technology’s stock price nearly hit $30 a share when it launched on Jan. 22, but its value fell by almost half when China announced the impending market controls (Smoore’s stock also took a hit). The RLX price now sits at just over $6 a share, and the company is facing multiple lawsuits from investors who claim the company ignored the risk of Chinese tobacco regulations and overstated its own previous sales performance when launching its IPO.
One investor lawsuit, according to Forbes, alleges that “RLX knew, or had information making it foreseeable to know, that China was moving forward in its establishment of a national standard for e-cigarettes, likely to affect RLX performance.” RLX denies that charge and points to documents it provided to potential investors that warned of possible regulatory challenges.
No one is certain how the Chinese government will control the domestic vaping market in the tobacco-dependent country. Between sales and tax revenue, cigarettes account for seven percent of Chinese government income, and it’s difficult to see the tobacco monopoly doing anything to upset the cigarette-dominated status quo.
On the other hand, although it’s by no means certain, the Chinese government may not interfere with Chinese companies like Aspire and Smoore that are primarily producing products for export. They bring income into the country and produce jobs without having much, if any, effect on the domestic Chinese tobacco market.
“Nothing ever seems to be clear where the Chinese tobacco monopoly is concerned, but I’d say the international [sales] part is probably the safer bit,” says British investment adviser Jon Fell. A partner at London-based Ash Park Capital, Fell has studied tobacco markets for almost three decades.
“On the tobacco side [China has] always been keen to go international, but generally haven’t got that far,” says Fell. “The vaping [export business] is the part they’re good at, so it would be stupid to kill it.”