The SmileDirectClub IPO Did Something Not Seen Since The Financial Crisis

Has the unprecedented greed and stupidity of WeWork and its CEO Adam Neumann burst the IPO bubble?

One look at the just IPOed stock of SmileDirectClub would suggest that the answer is yes: after going public at a price of $23/share, pricing above range, the stock has tumbled 12% on its first day of trading, after it sold 58.5 million Class A shares on Wednesday for $23 each, above the $19 to $22 offering range, valuing the company at $8.9 billion.

The Invisalign alternative (the company delivers teeth strengthening kits to your doorstep) raised $1.35 billion in this year’s fifth-largest IPO, which priced Wednesday night above its indicated range. The stock joins Uber – which priced within its indicated range – as the only 2019 debut above $1 billion to open lower.

And not just that: as Bloomberg points out that it has become the first U.S. firm since the financial crisis to raise more than $1 billion and price its IPO above range, yet sink in its opening trades.

More notably, with other mega-IPOs like Peloton – i.e. an exercise bike with an iPad superglued to it – and WeWork on deck, SmileDirectClub provides the first test in months on whether IPO investors will endorse a large, unprofitable firm surrounded by buzz despite a broader rotation into value trades.

The answer appears to be unsatisfactory.

Some more details from Bloomberg on the initial offering: SmileDirectClub is the first to US listing to raise at least $1 billion since Chewy on June 13 (it has since tumbled after hitting an all time high on the day of its IPO), but at least three more are expected in the coming weeks. CloudFlare Inc. is scheduled to debut Friday, Peloton on Sept. 26 and WeWork possibly by the end of this month.