Robbins Geller Rudman & Dowd LLP filed a class action lawsuit charging Waterdrop Inc. (NYSE: WDH), certain of its top executives and directors, as well as the underwriters of Waterdrop’s May 2021 initial public offering (the “IPO”) with violations of the Securities Act of 1933. Filed in the Southern District of New York on September 14, 2021 and captioned Sandoz v. Waterdrop Inc., the Waterdrop class action lawsuit seeks to represent purchasers of Waterdrop American Depositary Shares (“ADSs”) pursuant and/or traceable to the IPO.

The plaintiff is represented by Robbins Geller, which has extensive experience in prosecuting investor class actions including actions involving financial fraud. You can view a copy of the complaint by clicking here.

If you wish to serve as lead plaintiff of the Waterdrop class action lawsuit, please provide your information by clicking here. You can also contact attorney Brian Cochran of Robbins Geller by calling 800/449-4900 or via e-mail at bcochran@rgrdlaw.com. Lead plaintiff motions for the Waterdrop class action lawsuit must be filed with the court no later than November 15, 2021.

CASE ALLEGATIONS: The Waterdrop class action lawsuit alleges that the IPO’s Registration Statement failed to disclose that Waterdrop was the subject of an intense regulatory investigation and pending crackdown by Chinese authorities because of a variety of market abuses perpetrated by Waterdrop used to artificially inflate Waterdrop’s short-term financial results in the lead up to the IPO, including, among other things: (i) operating insurance platforms without proper governmental authorizations; (ii) mispricing risks for consumers; and (iii) illicitly using client information. The Waterdrop class action lawsuit further alleges that, 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. Furthermore, Waterdrop had suffered rapidly accelerating operating losses in the first quarter of 2021 which was completed weeks before the IPO.

On June 17, 2021, Waterdrop issued a press release announcing Waterdrop’s financial results for the quarter conducted before the IPO. In doing so, 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 operating loss of RMB111.1 million for the same period of 2020 – a more than four-fold increase. This rapid increase in operating expenses was due largely to the cessation of Waterdrop’s mutual aid business and growing customer acquisition costs.

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. As Bloomberg reported, “[r]egulators have since moved to shutter some operations including mutual aid healthcare platforms operated by Waterdrop.” The article continued: “The latest move will stymie growth in an industry that had been expected to grow to 2.5 trillion yuan ($385 billion) in a decade.”

Finally, on September 8, 2021, Waterdrop revealed that its operating losses for the quarter ended June 30, 2021 had continued to accelerate, totaling RMB815.4 million (US$126.3 million), 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 Waterdrop’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, 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 just four months previously.

THE LEAD PLAINTIFF PROCESS: The Private Securities Litigation Reform Act of 1995 permits any investor who purchased Waterdrop ADSs pursuant and/or traceable to the IPO to seek appointment as lead plaintiff in the Waterdrop class action lawsuit. A lead plaintiff is generally the movant with the greatest financial interest in the relief sought by the putative class who is also typical and adequate of the putative class. A lead plaintiff acts on behalf of all other class members in directing the Waterdrop class action lawsuit. The lead plaintiff can select a law firm of its choice to litigate the Waterdrop class action lawsuit. An investor’s ability to share in any potential future recovery of the Waterdrop class action lawsuit is not dependent upon serving as lead plaintiff.

ABOUT ROBBINS GELLER RUDMAN & DOWD LLP: With 200 lawyers in 9 offices nationwide, Robbins Geller Rudman & Dowd LLP is the largest U.S. law firm representing investors in securities class actions. Robbins Geller attorneys have obtained many of the largest shareholder recoveries in history, including the largest securities class action recovery ever – $7.2 billion – in In re Enron Corp. Sec. Litig. The 2020 ISS Securities Class Action Services Top 50 Report ranked Robbins Geller first for recovering $1.6 billion for investors last year, more than double the amount recovered by any other securities plaintiffs’ firm. Please visit http://www.rgrdlaw.com for more information.

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