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Oct. 7, 2019, 6:55 a.m. EDT

SmileDirectClub stock falls then recovers after scathing report from short seller

Hindenburg Research says company puts its patients at risk with its ‘teledentistry’ model; SmileDirect denies allegations

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By Ciara Linnane, MarketWatch

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Then there are issues relating to the company’s initial public offering in September, including that Chief Executive and Chairman David Katzman sold the company his private plane a month before the deal, as the company acknowledged in its IPO documents.

“And this wasn’t even the first time he sold the company an interest in one of his private planes,” said the Hindenburg report. “Insiders and affiliates cashed out almost $700 million of $1.27 billion in total net IPO proceeds.”

The stock has fallen 43% since it went public on Sept. 12.

“All told, we believe SmileDirectClub will wind up as a case study in why it’s a bad idea to invest in a company that attempts to fit a complex, dangerous medical process onto a low-cost, high volume assembly line,” said the Hindenburg report.

SmileDirect declined to answer emailed questions from MarketWatch. In its statement, the company hit out at “organized dentistry” and its “anticompetitive legal actions.”

“We will vigorously defend ourselves and our business model in order to continue to pursue our company’s mission to increase access to affordable, safe and convenient teeth straightening solutions,” said the statement.

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SmileDirect will report third-quarter results in November. In its IPO filing, the company disclosed sales of $432.2 million in 2019, up 190% from the year earlier. But losses grew to $74.8 million from $32.8 million the year before.

Shares were last up 2.9%. The Renaissance IPO ETF /zigman2/quotes/207665280/composite IPO -0.41%  was flat but is up 21% on the year, outperforming the S&P 500’s /zigman2/quotes/210599714/realtime SPX +0.64%  17% gain and the Dow Jones Industrial Average’s /zigman2/quotes/210598065/realtime DJIA +0.68% 13% gain.

Read now: The dark side of teeth-whitening strips

/zigman2/quotes/207665280/composite
US : U.S.: NYSE Arca
$ 46.27
-0.19 -0.41%
Volume: 72,819
Aug. 6, 2020 4:00p
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/zigman2/quotes/210599714/realtime
US : S&P US
3,349.16
+21.39 +0.64%
Volume: 2.41B
Aug. 6, 2020 5:08p
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/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,386.98
+185.46 +0.68%
Volume: 323.72M
Aug. 6, 2020 5:08p
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Ciara Linnane is MarketWatch's investing- and corporate-news editor. She is based in New York.

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