United States securities and exchange commission logo
August 10, 2023
Guang Yang
Vice President of Finance
Waterdrop Inc.
Block C, Wangjing Science and Technology Park
No. 2 Lize Zhonger Road
Chaoyang District, Beijing 100102
People s Republic of China
Re: Waterdrop Inc.
Form 20-F
For the Fiscal Year
Ended December 31, 2022
Filed April 17,
2023
File No. 001-40376
Dear Guang Yang:
We have reviewed your filing and have the following comments. In
some of our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Form 20-F for the Fiscal Year Ended December 31, 2022
General
1. In future filings,
please prominently disclose that you are not a Chinese operating
company but a Cayman
Islands holding company with operations conducted by your
subsidiaries and
through contractual arrangements with variable interest entities (VIEs)
based in China and that
this structure involves unique risks to investors. If true, disclose
that these contracts
have not been tested in court. Explain whether the
VIE structure is used
to provide investors with exposure to foreign investment in China-
based companies, and
disclose that investors may never hold equity interests in the
Chinese operating
company. Your disclosure should acknowledge that Chinese regulatory
authorities could
disallow this structure, which would likely result in a material change in
Guang Yang
FirstName
Waterdrop LastNameGuang Yang
Inc.
Comapany
August 10, NameWaterdrop
2023 Inc.
August
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FirstName LastName
your operations and/or a material change in the value of the
securities that you are
registering for sale, including that it could cause the value of such
securities to
significantly decline of become worthless. Please include your
proposed disclosure in the
response letter.
2. In future filings, please provide prominent disclosure about the legal
and operational risks
associated with being based in or having the majority of the company
s operations in
China. Your disclosure should make clear whether these risks could
result in a material
change in your operations and/or the value of the securities you are
registering for sale or
could significantly limit or completely hinder your ability to offer
or continue to offer
securities to investors and cause the value of such securities to
significantly decline or be
worthless. Your disclosure should address how recent statements and
regulatory actions
by China s government, such as those related to the use of variable
interest entities and
data security or anti-monopoly concerns, have or may impact the
company s ability to
conduct its business, accept foreign investments, or list on a U.S. or
other foreign
exchange. Please disclose the location of your auditor s
headquarters and whether and
how the Holding Foreign Companies Accountable Act, as amended by the
Consolidated
Appropriations Act, 2023, and related regulations will affect your
company. Please
include your proposed disclosure in your response letter.
3. In future filings, please include Item 16J of Form 20-F or tell us why
you do not need to
include this item. Please include your proposed disclosure in your
response letter.
Introduction, page 1
4. In future filings, clearly disclose how you will refer to the holding
company, subsidiaries,
and VIEs when providing the disclosure throughout the document so that
it is clear to
investors which entity the disclosure is referencing and which
subsidiaries or entities are
conducting the business operations. Refrain from using terms such as
we or our when
describing activities or functions of a VIE. For example, disclose, if
true, that your
subsidiaries and/or the VIE conduct operations in China, that the VIE
is consolidated for
accounting purposes but is not an entity in which you own equity, and
that the holding
company does not conduct operations. Disclose clearly the entity
(including the domicile)
in which investors are purchasing an interest. Please include your
proposed disclosure in
your response letter.
5. In future filings, please revise your definition of "China" or "PRC"
to remove the
exclusion of Hong Kong and Macau from this definition. The definition
may clarify that
the only time that "China" or the "PRC" does not include Hong Kong or
Macau is when
your are referencing specific laws and regulations adopted by the PRC.
If it does, please
revise your disclosure to discuss any commensurate laws or regulations
in Hong Kong, if
applicable, and any risks and consequences to the company associated
with those
regulations. Please also disclose in the definition section that the
same legal and
operational risks associated with operations in China may also apply
to operations in
Hong Kong. Please confirm your understanding and include your proposed
disclosure in
Guang Yang
FirstName
Waterdrop LastNameGuang Yang
Inc.
Comapany
August 10, NameWaterdrop
2023 Inc.
August
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FirstName LastName
your response letter.
Risk Factors
If the PRC government finds that the agreements that establish the structure,
page 35
6. We note your disclosure that the Cayman Islands holding company
controls and receives
the economic benefits of the VIEs' business operations through
contractual agreements
between the VIEs and your Wholly Foreign-Owned Enterprise (WFOE) and
that those
agreements are designed to provide your WFOE with the power, rights,
and obligations
equivalent in all material respects to those it would possess as the
principal equity holder
of the VIEs. We also note your disclosure that the Cayman Islands
holding company is the
primary beneficiary of the VIEs. However, neither the investors in the
holding company
nor the holding company itself have an equity ownership in, direct
foreign investment in,
or control of, through such ownership or investment, the VIEs.
Accordingly, in future
filings, please refrain from implying that the contractual agreements
are equivalent to
equity ownership in the businesses of the VIEs. Any references to
control or benefits that
accrue to you because of the VIEs should be limited to a clear
description of the
conditions you have satisfied for consolidation of the VIEs under U.S.
GAAP.
Additionally, your disclosure should clarify that you are the primary
beneficiary of the
VIEs for accounting purposes. Please also disclose in future filings,
if true, that the VIE
agreements have not been tested in a court of law. Please include your
proposed
disclosure in your response letter.
The PRC government's significant oversight and discretion over our business
operation , page 41
7. Given the significant oversight and discretion of the government of
the People s Republic
of China (PRC) over the operations of your business, in future filings
please describe any
material impact that intervention or control by the PRC government has
or may have on
your business or on the value of your securities. We remind you that,
pursuant to federal
securities rules, the term control (including the terms
controlling, controlled by, and
under common control with ) means the possession, direct or
indirect, of the power to
direct or cause the direction of the management and policies of a
person, whether through
the ownership of voting securities, by contract, or otherwise." Please
include your
proposed disclosure in your response letter.
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections,
page 153
8. We note your statement that you reviewed your register of members and
publicly
available documents such as beneficial ownership reports on Schedules
13D or 13G in
connection with your required submission under paragraph (a). Please
supplementally
describe any additional materials that were reviewed and tell us
whether you relied upon
any legal opinions or third party certifications such as affidavits as
the basis for your
submission. In your response, please provide a similarly detailed
discussion of the
materials reviewed and legal opinions or third party certifications
relied upon in
connection with the required disclosures under paragraphs (b)(2) and
(3).
Guang Yang
Waterdrop Inc.
August 10, 2023
Page 4
9. In order to clarify the scope of your review, please supplementally
describe the steps you
have taken to confirm that none of the members of your board or the
boards of your
consolidated foreign operating entities are officials of the Chinese
Communist Party. For
instance, please tell us how the board members current or prior
memberships on, or
affiliations with, committees of the Chinese Communist Party factored
into your
determination. In addition, please tell us whether you have relied
upon third party
certifications such as affidavits as the basis for your disclosure.
10. We note that your disclosures pursuant to Items 16I(b)(2), (b)(3), and
(b)(5) are provided
for Waterdrop Inc. and, in some cases, its VIEs or the VIEs
subsidiaries as well. We also
note that your list of subsidiaries in Exhibit 8.1 appears to indicate
that you have
subsidiaries in Hong Kong and mainland China that are not included in
your VIEs. Please
note that Item 16I(b) requires that you provide disclosures for
yourself and your
consolidated foreign operating entities, including variable interest
entities or similar
structures.
With respect to (b)(2), please supplementally clarify the
jurisdictions in which your
consolidated foreign operating entities are organized or
incorporated and provide the
percentage of your shares or the shares of your consolidated
operating entities owned
by governmental entities in each foreign jurisdiction in which
you have consolidated
operating entities in your supplemental response.
With respect to (b)(3) and (b)(5), please provide the required
information for you and
all of your consolidated foreign operating entities in your
supplemental response.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact Michael Henderson, Staff Accountant at (202) 551-3364
or Robert
Klein, Accounting Branch Chief at (202) 551-3847 if you have questions
regarding comments on
the financial statements and related matters. Please contact Madeleine Joy
Mateo, Staff
Attorney at (202) 957-9365 or Susan Block, Staff Attorney at (202) 551-3210
with any other
questions. Contact Austin Pattan at (202) 551-6756 or Jennifer Thompson at
(202) 551-3737 if
you have any questions about comments related to your status as a
Commission-Identified Issuer
during your most recently completed fiscal year.
FirstName LastNameGuang Yang Sincerely,
Comapany NameWaterdrop Inc.
Division of
Corporation Finance
August 10, 2023 Page 4 Office of
Finance
FirstName LastName