SmileDirectClub hopes to raise $100M in IPO

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Direct-to-consumer teeth-straightening service company SmileDirectClub filed an initial public offering (IPO) on August 16. The company hopes to raise $100 million, according to documents filed with the U.S. Securities and Exchange Commission (SEC).

The Nashville-based company, which sells clear aligners at a fraction of the cost of what patients pay to get traditional braces, stated in its SEC filing that it had treated more than 700,000 patients in the U.S. Puerto, Rico, Canada, the U.K., and Australia since its founding in 2014.

The clear-aligner market is more than 120 million people in the U.S., according to the SmileDirectClub filing. This figure is based on total malocclusion prevalence and age and also income demographics.

"We believe over 90% of this market is addressable today, and we are in the very early stages of penetrating this opportunity," the company stated in the SEC filing. It also noted that it would continue to introduce related products.

In addition, the company stated that it has opened more than 300 of its SmileShops in the U.S. and U.K., including those in partnership with CVS and Walgreens in the U.S. and Well Pharmacy in the U.K. The company's goal is to have more than 1,500 retail locations in the U.S. alone.

SmileDirectClub reported that it has entered into agreements with UnitedHealthcare and Aetna to include insurance coverage for its aligners on an in-network basis. Negotiations with other large insurance companies are ongoing, it added.

Not all the news in the filing was positive, however. As part of the filing, the company provided financial data indicating losses over the last two years.

  • Total revenues increased 190% to $423.2 million in 2018 from $146.0 million in 2017.
  • Revenues for the first six months of 2019 (end-June 30) totaled $373.5 million, an increase of 113% over the same period in 2018.
  • The company reported a net loss of $74.8 million in 2018, compared with a net loss of $32.8 million in 2017.
  • The company reported a net loss of $52.9 million in the first six months of 2019.

The filing noted certain risks that could have an adverse effect on the company, such as any potential changes in laws and regulations governing remote healthcare and the practice of dentistry.

In fact, SmileDirectClub is involved in several legal actions. In May 2019, a U.S. District Court judge ruled that the company's digital scans constituted the practice of dentistry. This ruling came as part of a decision in a case involving the company and the Georgia Board of Dentistry. An antitrust lawsuit against the Board of Dental Examiners of Alabama also is ongoing.

If SmileDirectClub's IPO moves ahead, the company's filing states that it wants to be listed on the Nasdaq Global Select Market under the symbol SDC. Neither the number of shares or the price ranges have been announced. The stock may not be sold, and no offers to buy can be accepted until the company's registration statement becomes effective, according to SmileDirectClub.

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