SmileDirectClub's sudden collapse leaves teeth alignment patients stranded

Catch up fast: SDC filed for bankruptcy protection in September, and subsequently failed to find a buyer during the Chapter 11 process.

• A company attorney told a judge Friday that it had become clear that the "Hail Mary" sale process would not be successful, and that SDC had abruptly begun winding down operations.
• The company effectively shut down, canceling undelivered orders and ending customer support.

As of just weeks ago, however, and about a month after its bankruptcy filing, SDC was still offering discounts to prospective customers who paid up front instead of paying over time, Axios has learned.

• A deal offered in an email campaign on October 30, shared with Axios by a customer, shows the company offered aligners for $995 to anyone who paid in full by Nov. 4 or $1,750 for anyone who signed up for the company's SmilePay monthly plan.
• "You have to act really fast to get these historic savings," CEO David Katzman told recipients in the email, adding that "this is truly a once-in-a-lifetime chance to get a smile you love at a savings that may never be repeated."

Of note: Email campaigns with discount offers were part of the company's normal sale strategy, and SDC has long offered an up-front payment discount on its website, advertising a price of $2,050 on its website last summer.

Joey Echeverria, a Nashville-area government employee, tells Axios that he signed up for the October 30 up-front deal and paid $995.

• He got an email in early December saying his aligners had been made. As of Monday he hadn't yet received them, and a tracking link he received redirected him to the company's going-out-of-business FAQ.
• "So I have no idea if my braces even shipped," he says. "Even if they did ship, do I even want to do it because they could be messed up. If they are messed up, I have no customer support, I have no guarantee. So I'm out a thousand dollars."

SDC customer Chantelle Jones, of Gloucestershire in the United Kingdom, told the BBC she's in the middle of treatment: Her top teeth are finished being straightened, but she hasn't received aligners for her bottom teeth.

• "I'm not sure if I'm going to get any money back," she said.

What they're saying: SDC media representatives and the company's bankruptcy attorney, Spencer Winters, did not respond to multiple requests for comment.

• The company addresses the subject of refunds on its website, saying in an FAQ response, "There will be more information to come once the bankruptcy process determines next steps and additional measures customers can take."
• Customers who signed up for the the monthly payment plan are expected to continue to make all monthly payments until made in full, it says.

Realigning expectations

As a general rule of thumb, customers are considered unsecured creditors in bankruptcy cases — which means they don't get paid anything unless there's money left after the debtor pays its secured lenders.

• "By all appearances it looks bleak for customers," McKool Smith bankruptcy attorney John Sparacino, who is not involved in the case, tells Axios.
• "I have to assume that general unsecured creditor claims are going to get probably zero out of this process — and unfortunately customers fall in that category."

Zoom out: The demise of SDC marks a dark turn in the furious market for teeth straightening — a competition involving dentists, the orthodontics lobby, state dental boards, a slew of upstart companies and the market leader, Align Technology's Invisalign.

• SDC went public in 2019, but its stock never returned to its IPO price of $23 despite heavy advertising and an early-pandemic boom in sales for the business, which was mostly conducted through the mail and digital communication.
• "They've been facing demand pressure for a couple of years now," Jefferies analyst Brandon Couillard, who tracks the teeth alignment industry, tells Axios. And "the amount that it required for them to acquire a new customer never came down for the business to be sustainable."

Yes, but: At least one competitor is already offering help to SDC customers.

• OrthoFX, which received FDA approval for its aligners earlier this year, said it's launching a hotline to provide free consultation to SDC patients.
• OrthoFX also said it would provide "special financial assistance and flexible payment plans" to SDC customers.

What others are saying: The American Dental Association, which represents dentists, said in a statement that it maintains its opposition to the SmileDirectClub model of direct-to-consumer dentistry.

• The ADA said it it "encourages any individual who will no longer have access to customer service — or is considering other DTC dental products or services — to speak with a dentist in their area."

Go deeper: The war for your teeth