Teeth-straightening startup SmileDirectClub Inc. went public Thursday, but investors may be frowning as the stock surprisingly opened below where the initial public offering was priced.
SmileDirectClub SDC, -17.52% ships clear aligners directly to customers, whose progress is monitored remotely by licensed dentists or orthodontists. Customers either go to a so-called SmileShop and get a free 3-D image taken of their teeth or buy a kit online to make an impression of their teeth to mail to SmileDirectClub. A dental professional then reviews the information and prescribes aligners if appropriate.
The company says the average treatment plan is around six months, significantly shorter than the 12 to 24 months a traditional course of braces would take. SmileDirectClub also says its program costs up to 60% less than the traditional course of orthodontic braces.
The Nashville-based company announced Wednesday afternoon that it will sell shares for $23 apiece in its initial public offering, higher than it previously expected. The company had targeted a range of $19 to $22, but will sell at least 58.5 million shares at the higher price to raise about $1.35 billion at an initial market valuation of about $10 billion.
But despite that enthusiasm didn’t carry over into Thursday trading, as the stock opened at $20.55, or 10.7% below the IPO price. It has traded within a range of $19.30 to $21.10 through midday trading.
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SmileDirectClub reached a valuation of around $3.2 billion last October, after raising $380 million in a funding round. Proceeds from the IPO will be used to pay bonuses, to fund tax and other obligations relating to its incentive bonus agreements, to redeem LLC units from pre-IPO investors and to fund a dividend to those investors, with the rest to be spent on general corporate purposes, according