After 9 years and 2 million customers, SmileDirectClub (the online orthodontics company) has shuttered. But, what exactly happened?

According to New York Times reporter Erin Griffith who has covered the firm extensively, the Nashville-based start-up suffered from both a disappointing IPO in 2019, and years of litigation. Let's dig into that second part.

In 2017, a BuzzFeed report detailed how the company was embroiled in several lawsuits against large groups of dentists in multiple states. Why? "Several dentists and orthodontists have made publicly false, disparaging and misleading statements on various social media websites regarding SmileDirectClub all in an effort to protect their traditional business model and to limit access of care to keep prices for orthodontic care artificially inflated," a statement from the company to BuzzFeed said at the time. In other words, SDC will come for you if you say anything bad about it.

That same year, the American Association of Orthodontists lodged complaints in 36 states alleging that SDC's practice of having patients skip in-person orthodontist visits and by-pass X-rays is “illegal and creates medical risks.” In 2019, a class action lawsuit was filed against the company, but an arbitration clause in SDC's customer contract meant that all but two plaintiffs dropped their case.

A Weak IPO

Beyond SmileDirectClub's myriad lawsuits, cease-and-desist orders against customers, and patent claims, the company also suffered an embarrassing IPO in September 2019. After opening at $23 a share (valuing the company at $8 billion), it dropped 28% by day's end. "The poor public debut marked SmileDirectClub as the worst IPO this year of a 'unicorn' company, or start-up valued more than $1 billion," CNBC noted. By November, the company's value had plummeted 61% to $8.83 a share.

Finally, in September 2023, SDC filed for Chapter 11 bankruptcy, vowing to restructure and emerge a better company. But when news of its permanent shutter were announced, Griffith was quick to point out that customers on the SmilePay Plan (a lifetime support program) were still obliged to continue paying.

THE VERDICT:

The 2010s was a wild time for start-ups. More specifically, "disruptors" like SmileDirect and WeWork turned out to be emperors without any clothes (but billions in their pockets). If your business model is sue into submission anyone who criticizes you, maybe open a law firm rather than an orthodontics service.