Shares in SmileDirectClub (SDC -13.62%) shot up over 17% on Monday morning when news of a big distribution deal with Walmart (WMT -1.61%) hit the street. The company provides teeth-straightening devices direct to consumers, cutting out expensive visits to orthodontists.
Under the terms of the deal, SmileDirectClub will provide a host of dental products exclusively to Walmart consumers, including electric toothbrushes, teeth-whitening equipment, a water flosser, sanitizing 'spa', and toothpaste. The electric toothbrush will cost about $25 and the teeth whitening kit is priced near $40.
Widely considered a "broken IPO," SmileDirectClub ended 2019 down some 50% from its initial public offering price of $20 a share. It's still very early innings and the stock is up nicely so far in 2020. The Walmart deal doesn't (yet) include the company's main product, the clear aligner. SmileDirectClub has already inked non-exclusive distribution deals with both CVS and Walgreens Boots Alliance for its aligner product.
SmileDirectClub is a battleground stock because the company aims to make quality healthcare cheaper by cutting out much of the orthodontist industry. The company provides clear aligners to consumers from its website. The aligners are based on technology created by Align Technology (ALGN 1.09%), whose original devices went off-patent in 2017.
The orthodontist market is a $945 billion global market, and naturally, orthodontists aren't happy to be dismissed as less-than-necessary. Several states, including California, Alabama, and Georgia, are attempting to protect the industry. In California, an X-ray is now required for orthodontic care.
The deal with Walmart will introduce the company to all of Walmart's customers, giving first-mover SmileDirectClub a tremendous advantage over its competition. The fast-growing company isn't profitable yet, and its high short interest make the stock highly volatile, but this news should make investors smile.