Glancy Prongay & Murray LLP has filed a class action lawsuit against SmileDirectClub on behalf of people or organizations that purchased or otherwise the company’s Class A common stock in its initial public offering (IPO) in September.
The law firm alleges that SmileDirectClub engaged in false advertising, fraud, negligence, and unfair and deceptive trade practices. Glancy Prongay & Murray also disputes the accuracy of several statements in SmileDirectClub’s registration statement and notes that the company is subject to litigation for operating as a dentist without proper licensing in several states, as well as other litigation.
Specifically, the complaint alleges that SmileDirectClub made materially false and/or misleading statements and failed to disclose material adverse facts about its business, operations, and prospects. The complaint also alleges that SmileDirectClub failed to disclose to investors that:
- Administrative personnel, rather than licensed doctors, provided treatment to SmileDirectClub’s customers and monitored their progress
- As a result, the company’s practices did not qualify as teledentistry under applicable standards
- As a result, SmileDirectClub was subject to regulatory scrutiny for the unlicensed practice of dentistry
- The efficacy of the company’s treatment was overstated
- SmileDirectClub had concealed these deceptive marketing practices prior to the IPO
- As a result of these issues, the company’s positive statements about its business, operations, and prospects were materially misleading and/or lacked a reasonable basis
During the IPO, SmileDirectClub sold approximately 58.5 million shares of Class A common stock at a price of $23 per share. By the time that Glancy Prongay & Murray filed its complaint, the stock was trading as low as $12.94 per share, representing a nearly 44% decline in price. Glancy Prongay & Murray notes that shareholders who have suffered a loss can contact the law firm to participate in the lawsuit.