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Chronicles

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Direct-to-consumer dental startup SmileDirectClub closes down 28% on its first day of trading, after raising $1.35B in its IPO at a $9B valuation

Lauren Debter / Forbes :

Forbes Lauren Debter

Context & Ripple Effects

SmileDirectClub's public-market debut closes the arc that began with its $380M private round at a $3.2B valuation in October 2018 and continued through its IPO filing last month. The company priced at roughly triple that private mark — a $9B valuation on a $1.35B raise — and public investors immediately marked it down 28%, meaning every buyer at the offer price started underwater.

The repricing lands in a year when consumer-facing health platforms have had mixed receptions: So-Young International closed up 31% on its first day back in May, while SmileDirectClub's aligner-by-mail model — remote monitoring instead of in-office orthodontics — now faces the discipline of quarterly public reporting.

First-order effects

  • SmileDirectClub banks $1.35B of new capital despite the drop, but IPO-price buyers absorb a 28% loss before the company files a single earnings report.
  • Late-stage investors who entered at the $3.2B private valuation remain well ahead even after the debut slide, while the gap between the $9B offer price and the closing price resets expectations for what public buyers will pay for the model.

Second-order effects

  • Adjacent dental-consumer plays such as Beam Dental — which ties insurance pricing to brushing data from its connected toothbrush — face a public-market read on whether venture-scale valuations survive contact with retail investors in consumer health.
  • Competitors in remote-monitored care get a free datapoint on how heavily the market discounts growth over profitability, shaping whether they pursue early listings or stay private longer.

Third-order effects

  • If the pattern holds — private rounds tripling valuations within a year of listing, then first-day markdowns — the disclosure-to-P&L gap becomes the defining test for consumer-health IPOs: public markets will demand a visible path from subscriber growth to durable economics that private backers never priced in.
  • A cold reception for one direct-to-consumer health debut raises the odds the next cohort prices more conservatively or delays, shifting leverage toward later-stage investors over founders at exit.

The trend: Consumer-health startups are reaching public markets faster than their unit economics mature, making first-day trading a referendum on the gap between venture-era valuations and disclosed financials.

Discussion

  • @levinepmc Norman Levine on x
    The list of IPOs of highly valued, profitless companies that private equity foists on the market and become instant duds keeps getting longer. What does this say about the valuations private equity firms and pension funds carry these investments at? https://www.cnbc.com/...
  • @ritikatshah Ritika Shah on x
    $SDC went from being the 5th largest IPO of 2019 to becoming the 5th worst debut so far this year (based on 1st day % performance). ICYMI, more here: https://www.cnbc.com/... https://twitter.com/...
  • @jasonlk @jasonlk on x
    Downside, a broken IPO Upside, “SmileDirectClub cofounders Jordan Katzman and Alex Fenkell, both 30, have rapidly emerged as two of the youngest billionaires in the country.” https://twitter.com/...
  • @ldrogen Leigh Drogen on x
    An amazingly successful IPO, the bankers deserve a raise, they saved the company 28% dilution! https://twitter.com/...
  • @lamonicabuzz Paul R. La Monica on x
    Pulling teeth. Yikes. Nobody smiling about SmileDirectClub IPO today. $SDC down 12%. Rival $ALGN down more than 2% as well. 🦷 😁