Waterdrop Inc (Waterdrop), a leading Chinese Internet insurance company. (Video screenshot)
Waterdrop Inc, a leading Chinese Internet insurance technology company, plans to go public in the United States (IPO) in the near future, but is opposed by Chinese Communist Party regulators, Reuters disclosed, citing multiple sources familiar with the matter. As Waterdrop Inc. has received heavy investment from Tencent in two recent rounds of financing, outsiders suspect that the Chinese Communist Party authorities want to stop Waterdrop’s IPO as a preparation for the next step of purging Tencent.
Citing four people familiar with the matter, Reuters disclosed on April 12 that Tencent-backed Waterdrop has been preparing for an IPO with financial advisers since the middle of last year and has secretly applied for one, but has been opposed by Communist Party regulators. Regulators believe the company’s business model is risky.
One of the sources revealed that the CBRC told Shuidri founder Shen Peng this month that it did not recommend that the company go public at this juncture.
But the report also mentions that Waterdrop denied in an email that Communist Party regulators opposed the company’s capital market plans and said its executives were in “routine communication” with regulators, while the CBRC did not immediately return Reuters’ request for comment.
The report also said that because of its offshore registration, Waterdrop would not have needed regulatory approval to go public in the U.S., but the CBRC’s disapproval of Waterdrop’s IPO stance “does not bode well” for the company’s share sale plans in general.
According to public information, Waterdrop was founded in April 2016 and mainly operates an Internet health protection platform, whose core products are Waterdrop Insurance Mall, Waterdrop Mutual and Waterdrop Fundraising. Among them, Waterdrop Insurance Mall is the main “profit cow” of Waterdrop, the latter two business contribution to the company’s revenue is mainly in pulling new and user conversion. It is unclear which of the company’s businesses the CBRC considers to be at risk.
According to the IT House website on Feb. 19 of this year, Waterdrop was valued at about 300 million yuan when it was created in 2016 and has raised a total of 3.2 billion yuan ($494 million) through five rounds of funding in the five years since then.
Information released by SkyEye shows that Waterdrop has completed seven rounds of financing since its creation. Among them, the Series D financing in August 2020 was jointly led by Tencent and Swiss Re, and followed by IDG Capital, Ignite Global Fund, Banyan Tree Capital and other old shareholders, with over $230 million raised. In the latest round of strategic financing, Tencent invested an additional $150 million, while other investors included well-known investment firm CICC Capital and Boyu Capital, a private equity fund founded by Jiang Zhicheng, the eldest grandson of former Chinese Communist Party leader Jiang Zemin.
Since Tencent has been the most prominent investor in the last two rounds of funding for Waterdrop, it is seen as the backer behind the company. It is widely believed that after Alibaba was purged by the regulator, Tencent will be the next target to be purged by Beijing authorities. Therefore, it is also believed that the opposition to the listing of Waterdrop in the US by regulators is likely to be related to the purge of Tencent by the Chinese Communist authorities.
In fact, in the past two days, Alibaba Group has been subjected to a “triple whammy” by Chinese regulators – on April 9, Alibaba’s second-hand trading platform “Idlefish” was arrested for allegedly On April 10, Alibaba was fined 18.228 billion yuan by the General Administration of Market Supervision for violating the Anti-Monopoly Law.
Overseas opinion suggests that Tencent’s WeChat and mobile payments have too high a share of the Chinese market and are likely to be the next “anti-monopoly” target of Beijing authorities, following Alibaba and Ant Financial Services.
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