SmileDirectClub Inc. is a tele-dentistry company founded in 2014 that produces 3D-printed clear aligners, is planning to go public. The company is planning to raise up to $1.29 billion in its IPO by selling 58.5 million Class A common stock shares priced between $19 and $22 per share. Assuming that each share is priced at a midpoint price of $20.50, the company's enterprise value at IPO would be approximately $8.0 billion. It's free float to outstanding share ratio will be approximately 15.08%.

SmileDirectClub has stated that it plans to use the proceeds from its IPO to pay employee bonuses ($25.4 million allocation), redeem LLC units from pre-IPO investors ($111.2 million allocation), fund tax withholding obligations ($101.7 million allocation) and on general corporate developments ($357.1 million allocation).

The company will be listed on Nasdaq under the ticker "SDC". Management's presentation of the company can be accessed here. The company's s expected IPO pricing date is September 11, 2019.

SmileDirectClub's main line of business involves shipping customized clear aligners to customers who communicate with licensed dentists or orthodontists through the company's app and website. Customers receive their customized aligners by either going to one of the 300-plus "SmileShop" locations near them or by purchasing a kit online. The customer then proceeds to make an impression of their teeth onto the mold that is enclosed in the kit and mails it to SmileDirectClub. Upon receiving the mold, a professional will examine it and decide whether aligners are appropriate for the customer. The company has undercut dentists and orthodontists by presenting a cheaper and thus more accessible alternative to braces. SmileDirectClub's direct-to-consumer business model competes with that of Invisalign.

SmileDirectClub has received fierce backlash and pushback from the dental industry. The American Association of Orthodontists has filed complaints and issued a statement that it strongly discourages people from using SmileDirectClub's services. The company has also come under general criticism that its business model which uses telemedicine is not entirely safe for patients. It is unclear how SmileDirectClub plans to address this opposition and whether this could hurt the company substantially more once it IPOs.

The company is experiencing tremendous growth but with increasing losses as well. Its revenue surged by 190% to $423 million in 2018; however, its losses also increased to $75 million in the same year (up from $33 million in 2017) which negatively impacted its net income. SmileDirectClub allocated more than half of its revenue to marketing last year in order to boost its online presence by placing ads on social media, television, and billboards. The company's sales & marketing efficacy rate, the dollar amount of additional revenue generated by each dollar of sales and marketing spend, was 0.9x in YTD. The company's gross margins have improved substantially from FY 2017 to FY 2019, increased from 56.14% to 77.62%.

Overall, September is ramping up to be a busy month for the IPO market. Renaissance Capital predicted that between 50 and 70 new deals from now until the end of the year to raise more than $15 billion. 2019 is marking itself as the biggest year in terms of proceeds, but not number of deals, since 2014. Other prominent IPO's scheduled for this month include that of WeWork, Peloton, Cloudflare, 10x Genomics, and Endeavor Group Holdings.

Some things to keep in mind when analyzing whether the stock is under - or over - priced would be to keep the following points in mind. Although SmileDirectClub is experiencing higher growth rates, it is still at negating operating levels and is burning through cash very quickly as its sales & marketing spend make marginal revenue even more expensive. From the market perspective, the global dental braces market projected to grow at a CAGR of 8% between 218 and 2023, SmileDirectClub's cheaper, more accessible, and more convenient alternative to the traditional orthodontic model presents a promising opportunity to take advantage of this growth and capture greater market share with time.