Market Overview

SmileDirectClub Denies Allegations in Class Action Suit, Short Seller Report

SmileDirectClub Denies Allegations in Class Action Suit, Short Seller Report

SmileDirectClub Inc (NASDAQ: SDC) is denying allegations in a lawsuit brought by dental trade organizations and disputing a short seller’s allegations that the company puts its customers at risk.

A Hindenburg Research report Friday pointed to allegations by the American Dental Association and American Association of Orthodontists, and a class action lawsuit in Tennessee targeting Smile Direct and its “teledentistry” model.

“We believe the company is carelessly cutting corners in a field of specialized medicine, putting customer safety at risk,” the short seller said.

“The company is another profitless, cash incinerating ‘unicorn’ that we believe has significant added financial headwinds to face as a result of regulatory, legal and customer satisfaction liabilities.”

SmileDirectClub, the most high-profile player in the at-home teeth straightening boom, went public in a $100-million IPO in August.

“There is no factual basis nor scientific or medical justification in these allegations to substantiate the false claims made about our model and the state-licensed doctors in our affiliated network,” SDC said in a statement.

“Backed by evidence, SmileDirectClub denies the allegations made in the class action lawsuit and by these dental trade organizations and their members, and we will vigorously defend our business model against any entity working to limit consumer choice.”

The Hindenburg report said the company is trading at about 6.5 times its revenue run-rate, and said it sees 70% downside just on valuation, and more given the lawsuits and related headwinds.

"These actions are viewed by SmileDirectClub as nothing more than the latest in a stream of unevidenced and misleading attempts by dental trade organizations, certain of their members and others motivated to thwart legitimate competition," the company said. 

SmileDirect was trading up 5.62% at $14.47 at the time of publication Friday. 

Related Links:

SmileDirectClub Files For $100M IPO

Cramer Talks Thursday's SmileDirectClub IPO, Gives Buying Advice 

Photo courtesy of SmileDirectClub. 


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Posted-In: Hindenburg ResearchNews Short Sellers Legal Best of Benzinga

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