INSUBCONTINENT EXCLUSIVE:
SmileDirectClub rang the opening bell earlier today, marking its first day of trading as a public company
The teeth-straightening company is now trading on the Nasdaq under the symbol “SDC.”Already, the stock is trading down 11% at $20.36 per
share.SmileDirectClub kicked off its IPO hoping to raise up to $1.3 billion at an offering price of $23 per share, with an expected market
cap of around $10 billion
The company originally intended to set its price between $19 and $22 per share.“We are focused on long term shareholder value – the next
12, 24, 36 months and beyond,” SmileDirectClub CFO Kyle Wailes said in a statement to TechCrunch
“Today’s IPO allows us to reinvest in innovation in product, process, international growth and customer experience
We are just getting started but our commitment to our mission, our 5,500+ team members, our customers and now our shareholders is stronger
than ever.”The company plans to use money raised from the IPO for international expansion and developing new dental products
SmileDirectClub filed to go public back in August amid concerns from national dental associations.Prior to this, SmileDirectClub reached a
$3.2 billion valuation following a $380 million funding round last October
Investors from Clayton, Dubilier - Rice led the round, which featured participation from Kleiner Perkins and Spark Capital
This funding came on top of Invisalign maker Align Technology’s $46.7 million investment in SmileDirectClub in 2016, and another $12.8
million investment in 2017 to own a total of 19% of the company.In 2018, SmileDirectClub’s revenues came in at $432.2 million, a
significant uptick from just $147 million the year prior.The company ships invisible aligners directly to customers, and licensed dental
professionals (either orthodontists or general dentists) remotely monitor the progress of the patient
Before shipping the aligners, patients either take their dental impressions at home and send them to SmileDirectClub or visit one of the
company’s “SmileShops” to be scanned in person.SmileDirectClub says it costs 60% less than other types of teeth-straightening
treatments, with the length of treatments ranging from four to 14 months
Upfront, SmileDirectClub costs $1,895, with the average treatment lasting six months.Though, members of the American Association of
Orthodontists have taken issue with SmileDirectClub, previously asserting that SmileDirectClub violates the law because its methods of
allowing people to skip in-person visits and X-rays is “illegal and creates medical risks.” The organization has also filed complaints
against SmileDirectClub in 36 states, alleging violations of statutes and regulations governing the practice of dentistry
Those complaints were filed with the regulatory boards that oversee dentistry practices and with the attorneys general of each
state.SmileDirectClub explicitly calls out those issues in its S-1 as potential risk factors
Here’s a key nugget:A number of dental and orthodontic professionals believe that clear aligners are appropriate for only a limited
percentage of their patients
National and state dental associations have issued statements discouraging use of orthodontics using a teledentistry platform
Increased market acceptance of our remote clear aligner treatment may depend, in part, upon the recommendations of dental and orthodontic
professionals and associations, as well as other factors including effectiveness, safety, ease of use, reliability, aesthetics, and price
compared to competing products.Furthermore, our ability to conduct business in each state is dependent, in part, upon that particular
state’s treatment of remote healthcare and that state dental board’s regulation of the practice of dentistry, each which are subject to
changing political, regulatory, and other influences
There is a risk that state authorities may find that our contractual relationships with our doctors violate laws and regulations prohibiting
the corporate practice of dentistry, which generally bar the practice of dentistry by entities
Two state dental boards have established new rules or interpreted existing rules in a manner that purports to limit or restrict our ability
to conduct our business as currently conducted.Additionally, as the S-1 notes, a national dental association recently filed a petition with
Food and Drug Administration claiming that SmileDirectClub’s manufacturing violates “prescription only” requirements
While no regulations or laws have been passed that would affect SmileDirectClub to date, it’s a possible scenario that would greatly
impact the company’s core business.
