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NEWS
Xponential Fitness tells HCM it will vigorously defend itself as class action lawsuit is filed in California
POSTED 22 Feb 2024 . BY Kath Hudson
BFT is one of Xponential's most recently-acquired brands Credit: Xponential Fitness
A class action lawsuit has been filed against Xponential Fitness in the state of California by an investment fund
Xponential has told HCM it believes says the case is 'without merit', saying it will defend its position vigorously
The court action states certain executive officers violated the Securities Exchange Act
The deadline for complainants to come forward is 9 April
Xponential Fitness has told HCM it will vigorously defend itself against claims made in a class action lawsuit being brought against the company for financial damages.

The lawsuit – City of Taylor General Employees Retirement System v Xponential Fitness Inc – was filed on 9 February in the state of California by the lead plaintiff.

Fifteen American law firms, including Robbins Geller Rudman & Dowd and Levi & Korsinsky, are now speculatively seeking engagement with complainants in a bid to gather a substantial enough cohort to represent Xponential Fitness shareholders in the case in a bid to recover funds. The deadline for them to come forward to participate in the legal action is 9 April.

It’s understood some of the law firms have up to 70 participants.

The court action states that certain executive officers of the company violated the Securities Exchange Act between 26 July 2021 and 7 December 2023.

The allegations are that:

False and/or misleading statements were made relating to the closure of 30 Xponential Fitness franchise locations.

Xponential’s reported same-store sales and average unit volume metrics had been exaggerated by the company excluding details about underperforming stores.

Eight out of 10 of Xponential’s brands at that point in time were losing money each month and more than 50 per cent did not make a positive financial return overall.

More than 60 per cent of the company’s revenue was one-time and non-recurring.

More than 100 franchises were for sale at a price that was at least 75 per cent less than their initial cost.


The court action will also contend that Xponential misled some franchisees into taking on franchises by misrepresenting the financial profile and profitability of existing studios, as well as the expected rate of return for new openings.

As a result, court papers contend that some franchisees are substantially in debt, suffering high attrition rates and running non-viable studios that have no realistic path to profitability.

An Xponential spokesperson told HCM: “We believe these claims are without merit, and we will vigorously defend ourselves against them. Beyond that, we don’t comment on litigation.”

FOOTNOTE
On 26 June 2023, short-only fund, Fuzzy Panda Research, published a report which raised a number of the same issues as the court action and alleged Xponential CEO, Anthony Geisler, has a history of misleading investors. This led to Xponential’s common stock falling by more than 37 per cent, however, the company and Geisler fought back strongly with the support of its investors and board and the shares recovered.

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NEWS
Xponential Fitness tells HCM it will vigorously defend itself as class action lawsuit is filed in California
POSTED 22 Feb 2024 . BY Kath Hudson
BFT is one of Xponential's most recently-acquired brands Credit: Xponential Fitness
A class action lawsuit has been filed against Xponential Fitness in the state of California by an investment fund
Xponential has told HCM it believes says the case is 'without merit', saying it will defend its position vigorously
The court action states certain executive officers violated the Securities Exchange Act
The deadline for complainants to come forward is 9 April
Xponential Fitness has told HCM it will vigorously defend itself against claims made in a class action lawsuit being brought against the company for financial damages.

The lawsuit – City of Taylor General Employees Retirement System v Xponential Fitness Inc – was filed on 9 February in the state of California by the lead plaintiff.

Fifteen American law firms, including Robbins Geller Rudman & Dowd and Levi & Korsinsky, are now speculatively seeking engagement with complainants in a bid to gather a substantial enough cohort to represent Xponential Fitness shareholders in the case in a bid to recover funds. The deadline for them to come forward to participate in the legal action is 9 April.

It’s understood some of the law firms have up to 70 participants.

The court action states that certain executive officers of the company violated the Securities Exchange Act between 26 July 2021 and 7 December 2023.

The allegations are that:

False and/or misleading statements were made relating to the closure of 30 Xponential Fitness franchise locations.

Xponential’s reported same-store sales and average unit volume metrics had been exaggerated by the company excluding details about underperforming stores.

Eight out of 10 of Xponential’s brands at that point in time were losing money each month and more than 50 per cent did not make a positive financial return overall.

More than 60 per cent of the company’s revenue was one-time and non-recurring.

More than 100 franchises were for sale at a price that was at least 75 per cent less than their initial cost.


The court action will also contend that Xponential misled some franchisees into taking on franchises by misrepresenting the financial profile and profitability of existing studios, as well as the expected rate of return for new openings.

As a result, court papers contend that some franchisees are substantially in debt, suffering high attrition rates and running non-viable studios that have no realistic path to profitability.

An Xponential spokesperson told HCM: “We believe these claims are without merit, and we will vigorously defend ourselves against them. Beyond that, we don’t comment on litigation.”

FOOTNOTE
On 26 June 2023, short-only fund, Fuzzy Panda Research, published a report which raised a number of the same issues as the court action and alleged Xponential CEO, Anthony Geisler, has a history of misleading investors. This led to Xponential’s common stock falling by more than 37 per cent, however, the company and Geisler fought back strongly with the support of its investors and board and the shares recovered.

RELATED STORIES
Xponential offloads Stride, its running-based boutique concept to focus on higher-growth markets


Xponential has passed ownership of Stride Fitness – the running brand it bought in January 2019 – to Shaun Grove, president of Rumble Boxing, with no payment changing hands.
FEATURE: Interview: Anthony Geisler


As Xponential buys two new brands, Kate Cracknell talks to the CEO about keeping the portfolio on track and optimising the opportunity
Xponential snaps up 11th brand – move into metabolic health with the acquisition of Lindora and does deal with Kinrgy dance brand


Xponential Fitness has acquired metabolic health business, Lindora, as its eleventh brand from Solis Capital Partners and Innovate Partners.
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Basic-Fit has signed up to trial the Wellhub network across its recently expanded Spanish network, giving access to subscribers and enabling them to use all 152 of its Spanish clubs.
Planet Fitness trans locker room debacle confirms the need for industry guidelines
Planet Fitness has become the subject of a hate campaign by certain groups of consumers and seen share values slide, in the wake of a trans person having been photographed using the women’s locker room at an Alaskan gym.
Top operators gather from across Europe for EHFF
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Below the Belt Melbourne Pedalthon

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+ More diary  
 


ADVERTISE . CONTACT US

Leisure Media
Tel: +44 (0)1462 431385

©Cybertrek 2024

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