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Waterdrop Inc.

Company NameWaterdrop Inc.
Stock SymbolWDH
Lead Plaintiff Motion DeadlineNovember 15, 2021

In May 2021, Waterdrop completed its IPO, selling 30 million ADSs at $12.00 per share.

Then, on June 17, 2021, Waterdrop reported its financial results for the quarter that closed before the IPO, disclosing among other results, that the Company’s operating costs and expenses had increased over 75%, or around RMB579.1 million, to RMB1,343.9 million, (US$205.1 million). As a result, the Company reported an operating loss for the quarter of RMB460.6 million (US$70.3 million), a four-fold increase over the prior year period.,

Then, on August 11, 2021, media outlets reported that the China Banking and Insurance Regulatory Commission directed insurance companies to terminate improper marketing and pricing practices and improve their user privacy protections. Bloomberg reported that “[r]egulators have since moved to shutter some operations including mutual aid healthcare platforms operated by Waterdrop.”  

Then, on September 8, 2021, Waterdrop announced that its operating losses for the quarter ended June 30, 2021 had continued to increase, totaling RMB815.4 million (US$126.3 million), compared with an operating profit of RMB7.2 million for the same period of 2020.  

On September 13, 2021, the Company’s ADSs dropped to a low of just $3 per ADS, or 75% below the IPO price.

The complaint filed alleges that Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors that: (1) Waterdrop had achieved a substantial portion of its historical revenue growth through illicit means that ran afoul of Chinese rules and regulations governing the insurance industry; (2) Waterdrop had been ordered by the Chinese government to shut down its mutual aid platform because of its failure to comply with Chinese law; (3) Waterdrop was under investigation by regulatory authorities for continued violations of Chinese law; (4) as a result of the foregoing, there existed a material undisclosed risk and substantial likelihood that Waterdrop would face severe adverse reactions by regulatory authorities following the IPO; (5) Waterdrop’s operating losses had increased more than four-fold in the first quarter of 2021 as a result of the cessation of its mutual aid business and rapidly growing customer acquisition costs; and (6) as a result of the foregoing, the registration statement’s representations regarding Waterdrop’s historical financial and operational metrics and purported market opportunities did not accurately reflect the actual business, operations, and financial results and trajectory of the Company in the lead up to the IPO, were materially false and misleading, and lacked a factual basis.

 

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