PE-backed Waterdrop falls on debut after $360m US IPO

The company sold 30 million American Depository Shares (ADS) at $12, the top end of the indicative range. Two investors, Boyu Capital and Hopu Investments, together subscribed to 6.88 million shares. The stock opened at $10.73 on May 7, peaked at $11.77, and closed at $9.70.

Waterdrop, which is also known as Shuidi, raised nearly $500 million in private funding, including a $230 million Series D last year led by Tencent Holdings and Swiss Re. Tencent is the largest external shareholder with 21.1%, while Swiss Re has 5.2%, according to the prospectus. Boyu and Gaorong Capital own 11.9% and 6%, respectively.

Peng Shen, the company’s founder, holds 24.4% as well as a majority voting interest. Previously a member of the founding team of Meituan, he established Waterdrop in 2016 and secured RMB50 million ($7.8 million) in angel funding the same year. The investors were Tencent, Chuxin Capital, Gaorong, IDG Capital, Meituan, ZhenFund, and Dianliang Jijin.

This was followed by a RMB160 million Series A in 2017 featuring Tencent, BlueRun Ventures, Sinovation Ventures, Meituan-Dianping, Gaorong, and IDG, AVCJ Research’s records show. In 2019, Tencent led a $74 million Series B and then Boyu led a RMB1 billion Series C.

Waterdrop claims to be the largest independent third-party insurance platform in China in terms of life and health insurance first year premiums (FYP) distributed in 2020. The company has positioned itself to target the RMB4.7 trillion of annual healthcare expenditure that is not covered by social medical insurance, commercial insurance, or other supplemental medical protection. Total healthcare spending in China reached RMB7 trillion in 2019.

It has three main business lines. First, an insurance marketplace that offers 200 different products from 62 providers. Waterdrop had 19.2 million paying insurance consumers in 2020, up from 8.8 million the previous year. Over the same period, FYP generated through the marketplace rose from RMB6.67 billion to RMB14.4 billion. Over 30.7 million paid policies have been issued since inception.

Second, a medical crowdfunding platform allows patients or their friends and relatives to initiate fundraising campaigns to cover medical costs. As of year-end 2020, over 340 million people had donated over RMB37 billion to more than 1.7 million patients. Waterdrop ranked first among all medical crowdfunding platforms in China last year, according to iResearch Consulting.

Third, a mutual aid platform takes a monthly membership fee from participants and gives them access to an online community through which they can apply for partial funding for critical medical procedures. Responsibility for verification of conditions - as well as decisions to refuse payments if documents are thought to be falsified - falls on community members rather than third parties.

The mutual aid platform was discontinued in 2021 and participants were given the opportunity to migrate their polices to the insurance marketplace.

Revenue – most of it comprising brokerage fees from sales of insurance products – came to RMB3.02 billion in 2020, up from RMB1.51 billion in 2019. The company’s net loss widened from RMB321.5 million to RMB663.9 million.

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• Topics
• Greater China
• Financials
• IPO
• China
• Financial Services
• insurance
• Gaorong Capital
• Boyu Capital
• Hopu Investment Management
• Meituan-Dianping
• Tencent
• IDG capital