SmileDirectClub Inc. witnessed a substantial decline in its share price during the extended trading session on Friday, following the company's voluntary filing for Chapter 11 bankruptcy protection. This move comes as the founders seek to recapitalize their teeth-straightening business.
SmileDirectClub (SDC) shares, which had been temporarily halted while showing a 0.9% increase in after-hours trading pending a significant announcement, experienced a rapid drop of up to 85% when trading in the stock resumed.
Before the close of Friday's regular trading session, the stock had already declined by 6.6% to reach 42 cents per share, resulting in a market capitalization for the company of just under $170 million.
In a late Friday statement, SmileDirectClub disclosed that its founders had committed to investing a minimum of $20 million to reinforce the company's financial position and safeguard its short- and long-term financial stability. Additionally, the statement noted that up to $60 million in additional capital is accessible upon the fulfillment of specific conditions.
The company emphasized that the founders' investment reflects their dedication to SmileDirectClub's mission of making premium oral care more accessible, as well as their belief in the success of the recently launched SmileMaker Platform and CarePlus growth initiatives.
To facilitate this transaction, SmileDirectClub voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas.
Since its initial public offering just over four years ago, SmileDirectClub has faced a series of challenges. The company issued approximately 58.5 million shares at $23 during its IPO. However, the stock never reached a closing price above $19.48, which occurred a week after the IPO. According to FactSet data, the stock achieved an intraday high of $21.10 during its post-IPO debut on the Nasdaq exchange.
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