SmileDirectClub, a tooth alignment company, has filed for voluntary protection under Chapter 11 of the US Bankruptcy Code. The company has been struggling with years of losses, weak sales for clear aligners, and a significant amount of long-term debt. However, SmileDirectClub plans to continue normal operations with an investment of at least $20 million from its founders. Additionally, up to $60 million of additional capital is available upon certain conditions. The company believes that the restructuring process will be brief.
Since going public in September 2019, SmileDirectClub has faced challenges in the form of supply chain inflation and cautious consumers. Despite expanding into new products and technology, the company has been unable to turn a profit. Furthermore, an investigative report by NBC News raised concerns about the safety of SmileDirectClub’s aligners, which resulted in consumer complaints. Prior to the bankruptcy filing, the company’s stock had plummeted by 97%. Wall Street remains cautious about the company’s prospects, emphasizing the need for improved execution and visibility into its new strategies.
SmileDirectClub will be represented by Kirkland & Ellis as its legal counsel, FTI Consulting as its financial adviser, and Centerview Partners as its investment banker. The company was founded in 2014 by Alex Fenkell and Jordan Katzman, with seed money from investor David Katzman. Despite its bankruptcy filing, SmileDirectClub aims to navigate this process quickly and emerge with a stronger financial footing.
