Health and Science

SmileDirectClub slides 28% after stock market debut

Key Points
  • SmileDirectClub shares slide 28% in first day of trading.
  • The teeth-straightening start-up priced its initial public offering at $23 a share.
  • SmileDirectClub shares close at $16.67 after opening at $20.55.
SmileDirectClub CFO and co-founder discuss the company's first trade
SmileDirectClub CFO and co-founder discuss the company's first trade

Online dentistry company SmileDirectClub shares slid 28% on Thursday, the worst market debut for a unicorn start-up so far this year.

The company's shares closed at $16.67 after opening at $20.55. SmileDirectClub ranks as the fifth worst debut of the 109 companies to go public this year. Shares of Uber, another unicorn — or start-ups valued at $1 billion or more — slid 7.6% on that stock's first day on the public markets.

The company priced its initial public offering at $23 per share on Wednesday, above the expected range of $19 to $22. SmileDirectClub sold 58.5 million shares, raising $1.3 billion and valuing the online dentistry company at $8.9 billion. Thursday's move values the company at roughly $6.4 billion.

The stock trades on the Nasdaq under the ticker symbol SDC.

"You know, we're here to build long-term value with the stock," SmileDirectClub co-founder Alex Fenkell said Thursday in an interview with CNBC's Leslie Picker. "How [the stock] priced today I don't think is going to dictate what we're doing here."

The start-up, founded in 2014, sells teeth aligners directly to consumers on its website and in its "SmileShops" starting at $1,895 for a two-year plan. Founders Fenkell and Jordan Katzman want to disrupt the orthodontics industry with less expensive teeth-straightening treatments, convenience, and splashy television and social media advertisements.

The company reported $423.2 million in sales last year, a 190% increase from the $146 million it reported in 2017, according to its prospectus filed last month. It posted a net loss of $74.8 million last year, more than double the net loss of $32.78 million in 2017.

Acquiring new customers is expensive. SmileDirectClub spent $289.3 million on marketing and general expenses last year.

Jordan Katzman's father, David Katzman, funded SmileDirectClub's seed round through his venture fund, Camelot Venture Group, and is the company's CEO. Camelot invests in direct-to-consumer brands, such as 1-800-Contacts and Quicken Loans.

David Katzman's brother, Steven Katzman, is chief operating officer. The Katzman family, combined, will retain more than 65% of the voting power between the three men after the offering. CEO David Katzman alone will hold nearly 30% of the vote with 87 million Class B shares, which control 10 votes for every 1 vote offered to a Class A share.

SmileDirectClub operates more than 300 locations, according to its initial prospectus filing. It has also signed partnerships with Walgreens and CVS to open "SmileShops" inside their drugstores.

Customers can visit a SmileShop to have someone scan their teeth and create a 3D image, which SmileDirectClub then uses to build a custom aligner. They can also order a kit online and send back an impression.

The Nashville, Tennessee-based company plans to use the proceeds from its IPO to fund international expansion and research and development, according to the filing. SmileDirectClub's aligners are currently available in the U.S., Canada, Australia and the U.K.

— CNBC's Elijah Shama contributed to this report.

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