Reuters
- Hindenburg Research tweeted Thursday that SmileDirectClub admitted in a court case filed Wednesday that its stores in California were raided in 2018 by the Dental Board of California.
- Shares fell as much as 13% on the news. SmileDirectClub filed the case against the Dental Board of California and is seeking damages.
- Hindenburg shorted shares of SmileDirectClub in early October and sees 85% downside for the company.
- Watch SmileDirectClub trade live on Markets Insider.
SmileDirectClub shares plunged as much as 13% on Thursday after Hindenburg Research - which has a short position on the company - tweeted that the company's SmileShop retail stores had been raided by the Dental Board of California.
The case was filed by SmileDirectClub against the Dental Board of California on Wednesday. It alleges that stores in Oakland, San Francisco, and Hollywood, California were raided unannounced by the board on May 31, 2018.
"SmileDirectClub filed its lawsuit against the California Dental Board and one of its investigators who has engaged in a pattern of illegal behavior in an attempt to harass and intimidate our customers and our team members at the SmileShops in California," a spokesperson for SmileDirectClub told Markets Insider.
"This investigator accelerated the activity starting on September 16 of this year despite the California board closing its prior investigation in July," the spokesperson said. "This really left us no choice but to file this lawsuit so we could protect our club members, our team members, and our mission to democratize access to affordable care."
The case, which Hindenburg Research tweeted as a slideshow, states that "as a result, the raids seriously harmed SmileDirect's business, revenue, goodwill, employee relations, and reputation in the marketplace."
Hindenburg Research has come after SmileDirectClub before. In a research note published in early October, it claimed that SmileDirectClub is "carelessly cutting corners" and "putting customer safety at risk." It said that the company has 85% downside, and put a price target of $2 on the shares.
SmileDirectClub has had a rough start since its September IPO, which was the worst-performing US debut with a valuation over $1 billion since 2007, according to Bloomberg data. Shares of the company slid 28% below their offer price of $23 on the first day of trading.
Thursday, shares closed down roughly 60% since its IPO in September.
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