A lawsuit was filed on behalf of investors in Waterdrop Inc. (NYSE:WDH) shares over alleged securities laws violations.
San Diego, CA -- (SBWIRE) -- 09/27/2021 -- An investor, who purchased NYSE: WDH shares, filed a lawsuit against Waterdrop Inc. over alleged violations of Federal Securities Laws in connection with the company's May 2021 initial public stock offering (the "IPO").
Investors who purchased shares of Waterdrop Inc. (NYSE: WDH) have certain options and for certain investors are short and strict deadlines running. Deadline: November 15, 2021. NYSE: WDH investors should contact the Shareholders Foundation at firstname.lastname@example.org or call +1(858) 779 - 1554.
China based Waterdrop Inc. provides online insurance brokerage services to match and connect users with related insurance products underwritten by insurance companies in the People's Republic of China.
On or about May 7, 2021, Waterdrop Inc. sold about 30 million shares of stock in its initial public stock offering (the "IPO") at $12 a share, raising nearly $360 million in new capital.
In April 2021, before the IPO, Reuters reported that Waterdrop received pushback from Chinese regulators before its U.S. IPO because its business model was seen as risky.
On June 17, 2021, Waterdrop Inc. announced it's financial results for the quarter conducted before the IPO. In doing so, Waterdrop Inc. 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 Inc. 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.
Shares of Waterdrop Inc. (NYSE: WDH) declined to as low as $2.71 per share on September 20, 2021.
The plaintiff claims 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 operating insurance platforms without proper governmental authorizations, mispricing risks for consumers; and (iii) illicitly using client information.
The plaintiff 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.
Those who purchased shares of Waterdrop Inc. (NYSE: WDH) have certain options and should contact the Shareholders Foundation.
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