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Tech start up SmileDirectClub announces share pricing for $1.29bn IPO

  • Teeth-straightening start-up to sell 58.5 million shares for $19-$22 each, expects to raise $1.29bn
  • Posted $373.5m revenue in H1 2019 but still a loss-making company
  • Researchers forecast busy September after five companies set IPO terms in midweek

Teledentistry enterprise SmileDirectClub Inc. wants to raise more than $1.2bn in a lucrative initial public offering (IPO) this month after pricing shares at $19–$22 in an updated filing with the US Securities and Exchange Commission.

SmileDirectClub was founded five years ago and has built a reputation as a cost-effective alternative for customers requiring braces.

Its popular clear aligners feature in a product line promising to straighten teeth for 60% less than the price of traditional braces and within half the time.

The Nashville-based company generated $373.5m in revenue during the first six months of the year, but it has struggled to turn a profit and came in with a pro forma loss of $68.2m for the period overall.

It also has $171m in long-term debt and a cash pile of $149.1m.

SmileDirectClub said on Wednesday that 58.5 million shares would be sold when the deal lands some time next week.

The $1.2bn proceeds that it expects to raise are intended to pay bonuses, redeem LLC units and fund a dividend for investors who bought into the company prior to the IPO.

Those investors include Clayton, Kleiner Perkins and Dubilier & Rice – a trifecta of venture capitalists that led a funding round just under a year ago and raised $380m in the process.

SmileDirectClub was valued at $3.2bn in October 2018, so the potential post-IPO valuation represents a considerable hike.

The company has also received funding since 2014 from the Camelot Venture Group co-owned by SmileDirectClub’s CEO David Katzman.

It intends to list under the NASDAQ:SDC ticker when it goes public with an up-C structure before the end of the month.

The tech start-up was one of five companies to outline its terms for IPOs in midweek and institutional research provider Renaissance Capital said it expects September to be a busy month with several $1bn+ deals expected after Monday’s Labor Day.

Q4 2019 is also tipped to see a flurry of activity with no less than 50–70 deals overall.

“The calendar is active and we expect this to be the most dollars raised since 2014, and the second best year since the 1990 to 2000 period during the internet bubble,” Renaissance principal, Kathleen Smith said.

WeWork parent, The We Company, will headline a busy autumnal period for IPOs and people familiar with the office rental enterprise’s share sale said on Wednesday that its roadshow could get underway before Friday 13th September.

Goldman Sachs and JP Morgan Securities feature in an extensive underwriting team for the much-anticipated IPO.

The We Company also added a woman, Frances Frei, to its board this week after receiving criticism for its plans to go public with seven-male directors.

The move is part of the company’s recent drive to increase gender and ethnic diversity for executive positions.