SmileDirectClub Fails to Impress in IPO

By Chris Lange Updated Jan 6, 2:33AM EST · Published Sep 12, 1:30PM EDT

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SmileDirectClub Fails to Impress in IPO — © Thinkstock

SmileDirectClub Inc. (NASDAQ: SDC) shares dropped on Thursday in its IPO. Shares entered the market at $20.55, well below the pricing of the offering at $23 per share. The company originally expected to price its 58.54 million shares in the range of $19 to $22 per share, with an overallotment option for an additional 8.78 million shares. At the pricing, the entire offering is valued up to $1.55 billion.

While this IPO is relatively unimpressive, another IPO, 10X Genomics entered the market with a bang earlier on Thursday.

The underwriters for the offering are JPMorgan, Citigroup, Merrill Lynch, Jefferies, UBS, Credit Suisse, Guggenheim Securities, Stifel, William Blair and Loop Capital.

This is an industry pioneer, as the first direct-to-consumer medtech platform for transforming smiles. Through its teledentistry technology and vertically integrated model, SmileDirectClub is changing the oral care industry.

Its clear aligner treatment addresses the large and underserved global orthodontics market. An estimated 85% of people worldwide suffer from malocclusion, yet less than 1% receive treatment annually. The goal is to improve penetration into this untapped market by democratizing access to a more affordable, convenient and accessible solution for a straighter smile. It believes it is the leading player in this early but massive opportunity.

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In the filing, the firm described its finances as follows:

Our total revenues increased 190%, to $423.2 million in 2018 from $146.0 million in 2017. Our total revenues for the six months ended June 30, 2019 were $373.5 million, an increase of 113% over the same time period in 2018. We generated net losses of $(74.8) million and $(32.8) million and Adjusted EBITDA of $(16.9) million and $(21.1) million in 2018 and 2017, respectively, and net losses of $(52.9) million and Adjusted EBITDA of $2.3 million for the six months ended June 30, 2019. Our rapid growth validates our value proposition and compelling business model.

The company intends to use the net proceeds from this offering to purchase and cancel LLC units from pre-IPO investors, pay incentive bonuses, pay distributions to pre-IPO investors and for working capital and general corporate purposes.

Shares of SmileDirectClub traded down more than 17% to $19.02, in a range of $18.13 to $21.10 on the day thus far. Also, more than 31 million shares had moved on the day as of 1:30 p.m. Eastern.

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About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.