Waterdrop investors may receive additional information about the case by clicking the link "Submit Your Information" above. If you are a member of the class described above, you may no later than November 15, 2021 move the Court to serve as lead plaintiff of the class, if you so choose.
A class action lawsuit has been filed on behalf of those who purchased or acquired Waterdrop Inc. (“Waterdrop”) (NYSE: WDH) American Depositary Shares (“ADSs”) in or traceable to Waterdrop’s May 2021 initial public offering (the “IPO”).
Waterdrop operates an insurance technology platform and is based in Beijing, China. Waterdrop has historically operated three business segments: (i) an insurance marketplace that matches consumers with health and life insurance products; (ii) medical crowdfunding, which enables people to provide donations to people with significant medical costs; and (iii) mutual aid, which enabled people suffering from over 100 types of critical illness to spread their medical cost burdens. Waterdrop discontinued its mutual aid segment in March 2021, shortly before the IPO.
On April 16, 2021, Waterdrop filed a registration statement on a Form F-1 for the IPO, which, after an amendment, was declared effective on May 6, 2021 (the “Registration Statement”). On May 7, 2021, Waterdrop filed a prospectus for the IPO on a Form 424B4, which incorporated and formed part of the Registration Statement. The Registration Statement was used to sell to the investing public 30 million Waterdrop ADSs at $12 per ADS. The complaint alleges that the Registration Statement failed to disclose that Waterdrop had suffered ballooning losses in the first quarter of 2021 and violated numerous Chinese laws and regulations governing the insurance industry.
The truth began to emerge on June 17, 2021, when Waterdrop issued a press release announcing its financial results for the quarter ended March 31, 2021, the quarter conducted before the IPO. Waterdrop reported that its operating costs and expenses had ballooned over 75%, or RMB579.1 million, to RMB1,343.9 million (US$205.1 million). As a result, Waterdrop suffered an operating loss for the quarter of RMB460.6 million (US$70.3 million), compared with an operating loss of RMB111.1 million for the same period of 2020 – a more than four-fold increase.
Then, on August 11, 2021, multiple news sources reported that China’s banking and insurance watchdog, the China Banking and Insurance Regulatory Commission, had issued an order directing insurance companies to cease improper marketing and pricing practices rampant in the industry and enhance their user privacy protections. Failure to comply would reportedly result in the offenders being “severely punished” by Chinese authorities.
Finally, on September 8, 2021, Waterdrop issued a press release announcing its financial results for the quarter ended June 30, 2021. The release stated that Waterdrop’s operating losses had continued to accelerate, totaling RMB815.4 million (US$126.3 million) for the quarter, compared with an operating profit of RMB7.2 million for the same period of 2020. This was once again due to a sharp increase in Waterdrop’s operating costs and expenses, as the company’s operating costs and expenses during the quarter increased by RMB1,081.1 million, or 160.5% year over year, to RMB1,754.7 million (US$271.8 million) from RMB673.6 million for the same period of 2020.
On September 13, 2021, the day before the complaint was filed, Waterdrop ADSs dropped to a low of just $3 per ADS, 75% below the price at which Waterdrop ADSs were sold to the investing public.
The complaint alleges that the Registration Statement failed to disclose that Waterdrop was engaged in a variety of market abuses used to artificially inflate Waterdrop’s short-term financial results in the lead up to the IPO, including: (i) operating insurance platforms without proper governmental authorizations; (ii) mispricing risks for consumers; and (iii) illicitly using client information. Indeed, unbeknownst to investors, the reason that Waterdrop had discontinued its mutual aid segment was because it had been ordered to do so by Chinese regulators.
A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member’s claim is typical of the claims of other class members, and that the class member will adequately represent the class. Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. Filling out the online form above or communicating with any counsel is not necessary to participate or share in any recovery achieved in this case. Any member of the purported class may move the court to serve as a lead plaintiff through counsel of his/her choice, or may choose to do nothing and remain an inactive class member.
If you wish to discuss this action or have any questions concerning this notice or your rights or interests with respect to these matters, please contact Kessler Topaz Meltzer & Check, LLP: James Maro, Esq. (484) 270-1453; toll-free at (844) 887-9500; or via e-mail at info@ktmc.com. If you would like additional information about the suit, please click on the link "Submit Your Information" above and fill out the form as promptly as possible.