SmileDirectClub Founders Consider Deal to Avoid Liquidation
SmileDirectClub, a direct-to-consumer teeth-straightening company, is facing the possibility of liquidation. The company’s founders, Jordan Katzman and Alex Fenkell, are considering a deal that could save the company from this fate.
SmileDirectClub’s Struggles
SmileDirectClub was founded in 2014 and quickly became a popular choice for people looking for an affordable way to straighten their teeth. The company sold clear aligners directly to customers, cutting out the middleman and allowing them to offer a lower price than traditional orthodontists.
However, the company has struggled in recent years. In 2019, SmileDirectClub was hit with a lawsuit from the American Association of Orthodontists, which accused the company of practicing dentistry without a license. The lawsuit was eventually settled, but the company has continued to struggle financially.
The Proposed Deal
In an effort to avoid liquidation, Katzman and Fenkell are considering a deal that would involve selling the company to a private equity firm. The deal would involve the founders giving up their majority stake in the company, but they would remain involved in the company’s operations.
The deal would also involve the company’s creditors taking a significant haircut. The creditors, which include banks and venture capital firms, would receive a fraction of what they are owed.
The Benefits of the Deal
The proposed deal would have several benefits for SmileDirectClub. First, it would allow the company to avoid liquidation and continue operating. Second, it would give the company access to additional capital, which could be used to invest in new products and services. Finally, it would give the founders a chance to remain involved in the company’s operations.
The Risks of the Deal
The proposed deal also carries some risks. First, the creditors may not be willing to accept the terms of the deal. Second, the company may not be able to raise enough capital to invest in new products and services. Finally, the founders may not be able to remain involved in the company’s operations if the deal is not successful.
The Future of SmileDirectClub
The future of SmileDirectClub is uncertain. The proposed deal could save the company from liquidation, but it carries some risks. It remains to be seen if the founders and creditors can come to an agreement that is beneficial for all parties involved.