SmileDirectClub, Inc. (“SmileDirectClub”) (NASDAQ: SDC) today
announced the pricing of its offering of $650,000,000 aggregate
principal amount of 0.00% convertible senior notes due 2026 (the
“notes”) in a private offering that is exempt from the registration
requirements of the Securities Act of 1933, as amended (the
“Securities Act”) to persons reasonably believed to be qualified
institutional buyers pursuant to Rule 144A under the Securities
Act. The offering size was increased from the previously announced
offering size of $350,000,000 aggregate principal amount of notes.
The issuance and sale of the notes are scheduled to settle on
February 9, 2021, subject to customary closing conditions.
SmileDirectClub also granted the initial purchasers of the notes an
option to purchase, for settlement within a period of 13 days from,
and including, the date notes are first issued, up to an additional
$97,500,000 principal amount of notes.
The notes will be senior, unsecured obligations
of SmileDirectClub, will not bear regular interest, and the
principal amount of the notes will not accrete. The notes will
mature on February 1, 2026, unless earlier repurchased, redeemed or
converted. Before August 1, 2025, noteholders will have the right
to convert their notes only upon the occurrence of certain events.
From and after August 1, 2025, noteholders may convert their notes
at any time at their election until the close of business on the
second scheduled trading day immediately before the maturity date.
SmileDirectClub will settle conversions by paying or delivering, as
applicable, cash, shares of its Class A common stock or a
combination of cash and shares of its Class A common stock, at
SmileDirectClub’s election. The notes will be redeemable, in whole
or in part, for cash at SmileDirectClub’s option at any time, and
from time to time, on or after February 6, 2024 and on or before
the 40th scheduled trading day immediately before the maturity
date, but only if the last reported sale price per share of
SmileDirectClub’s Class A common stock exceeds 130% of the
conversion price for a specified period of time. The redemption
price will be equal to the principal amount of the notes to be
redeemed, plus accrued and unpaid special interest and additional
interest, if any, to, but excluding, the redemption date. The
initial conversion rate is 55.3710 shares of Class A common stock
per $1,000 principal amount of notes, which represents an initial
conversion price of approximately $18.06 per share of Class A
common stock. The initial conversion price represents a premium of
approximately 40.0% over the last reported sale of $12.90 per share
of SmileDirectClub’s Class A common stock on February 4, 2021. The
conversion rate and conversion price will be subject to adjustment
upon the occurrence of certain events.
SmileDirectClub estimates that the net proceeds
from the offering will be approximately $630 million (or
approximately $725 million if the initial purchasers fully exercise
their option to purchase additional notes), after deducting the
initial purchasers’ discounts and commissions and estimated
offering expenses. SmileDirectClub intends to use approximately $60
million of the net proceeds to fund the cost of entering into the
capped call transactions described below. SmileDirectClub intends
to use the remainder of the net proceeds from the offering for
general corporate purposes, which shall include repaying amounts
owed under our existing credit facilities. If the initial
purchasers exercise their option to purchase additional notes, then
SmileDirectClub intends to use a portion of the additional net
proceeds to fund the cost of entering into additional capped call
transactions as described below.
In connection with the pricing of the notes,
SmileDirectClub entered into privately negotiated capped call
transactions with one or more of the initial purchasers of the
notes and/or their respective affiliates and/or other financial
institutions (in this capacity, the “option counterparties”). The
capped call transactions will cover, subject to anti-dilution
adjustments substantially similar to those applicable to the notes,
the number of shares of SmileDirectClub’s Class A common stock that
will initially underlie the notes. The capped call transactions are
expected generally to reduce the potential dilution to
SmileDirectClub’s Class A common stock upon any conversion of notes
and/or offset any potential cash payments SmileDirectClub is
required to make in excess of the principal amount of converted
notes, as the case may be, with such reduction and/or offset
subject to a cap initially equal to approximately $25.80 per share
of SmileDirectClubs’s Class A common stock (which represents a
premium of 100.0% over the last reported sale price of
SmileDirectClub’s Class A common stock on February 4, 2021).
SmileDirectClub expects that, in connection with
establishing their initial hedge of the capped call transactions,
the option counterparties or their respective affiliates expect to
purchase shares of SmileDirectClub’s Class A common stock and/or
enter into various derivative transactions with respect to
SmileDirectClub’s Class A common stock concurrently with, or
shortly after, the pricing of the notes, including potentially with
certain investors in the notes. These activities could increase (or
reduce the size of any decrease in) the market price of the Class A
common stock or the notes at that time. In addition, the option
counterparties or their respective affiliates may modify their
hedge positions by entering into or unwinding various derivatives
with respect to SmileDirectClub’s Class A common stock and/or
purchasing or selling shares of Class A common stock or other
securities of SmileDirectClub in secondary market transactions
following the pricing of the notes and from time to time prior to
the maturity of the notes (and are likely to do so following any
conversion of the notes, any repurchase of the notes by
SmileDirectClub on any fundamental change repurchase date, any
redemption date or any other date on which the notes are retired by
SmileDirectClub, in each case if we exercise our option to
terminate the relevant portion of the capped call transactions
where such termination is at our option). This activity could also
cause or avoid an increase or a decrease in the market price of the
Class A common stock or the notes, which could affect the ability
of noteholders to convert the notes and, to the extent the activity
occurs during any observation period related to a conversion of the
notes, could affect the number of shares of SmileDirectClub’s Class
A common stock and value of the consideration that noteholders will
receive upon conversion of the notes.
The offer and sale of the notes and any shares
of Class A common stock issuable upon conversion of the notes have
not been, and will not be, registered under the Securities Act or
any other securities laws, and the notes and any such shares cannot
be offered or sold except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act and any other applicable securities laws. This press
release does not constitute an offer to sell, or the solicitation
of an offer to buy, the notes or any shares of common stock
issuable upon conversion of the notes, nor will there be any sale
of the notes or any such shares, in any state or other jurisdiction
in which such offer, sale or solicitation would be unlawful.
Forward-Looking Statements
This press release contains forward-looking
statements. All statements other than statements of historical
facts may be forward-looking statements. Forward-looking statements
generally relate to future events and include, without limitation,
projections, forecasts and estimates about possible or assumed
future results of our business, financial condition, liquidity,
results of operations, plans, and objectives. Some of these
statements may include words such as “expects,” “anticipates,”
“believes,” “estimates,” “targets,” “plans,” “potential,”
“intends,” “projects,” and “indicates.”
Although they reflect our current, good faith
expectations, these forward-looking statements are not a guarantee
of future performance, and involve a number of risks,
uncertainties, estimates, and assumptions, which are difficult to
predict. Some of the factors that may cause actual outcomes and
results to differ materially from those expressed in, or implied
by, the forward-looking statements include, but are not necessarily
limited to: the duration and magnitude of the COVID-19 pandemic and
related containment measures; our management of growth; the
execution of our business strategies, implementation of new
initiatives, and improved efficiency; our sales and marketing
efforts; our manufacturing capacity, performance, and cost; our
ability to obtain future regulatory approvals; our financial
estimates and needs for additional financing; consumer acceptance
of and competition for our clear aligners; our relationships with
retail partners and insurance carriers; our R&D,
commercialization, and other activities and expenditures; the
methodologies, models, assumptions, and estimates we use to prepare
our financial statements, make business decisions, and manage
risks; laws and regulations governing remote healthcare and the
practice of dentistry; our relationships with vendors; the security
of our operating systems and infrastructure; our risk management
framework; our cash and capital needs; our intellectual property
position; our exposure to claims and legal proceedings; and other
factors described in our filings with the Securities and Exchange
Commission, including but not limited to our Annual Report on Form
10-K for the year ended December 31, 2019 and our Quarterly Report
on Form 10-Q for the quarter ended September 30, 2020.
New risks and uncertainties arise over time, and
it is not possible for us to predict all such factors or how they
may affect us. You should not place undue reliance on
forward-looking statements, which speak only as of the date they
are made. We are under no duty to update any of these
forward-looking statements after the date of this press release to
conform these statements to actual results or revised expectations.
You should, therefore, not rely on these forward-looking statements
as representing our views as of any date subsequent to the date of
this press release.
About SmileDirectClub
SmileDirectClub, Inc. (Nasdaq: SDC) is an oral
care company and creator of the first med tech platform for teeth
straightening. Through its cutting-edge telehealth technology and
vertically integrated model, SmileDirectClub is revolutionizing the
oral care industry, from clear aligner therapy to its affordable,
premium oral care products. SmileDirectClub’s mission is to
democratize access to a smile each and every person loves by making
it affordable and convenient for everyone. SmileDirectClub is
headquartered in Nashville, Tennessee and operates in the U.S.,
Canada, Australia, New Zealand, United Kingdom, Ireland, Germany,
Austria, Hong Kong, Singapore and Spain. For more information,
please visit SmileDirectClub.com.
Contact:Investor Relations:
investorrelations@smiledirectclub.com Media Relations:
press@smiledirectclub.com
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