Xponential Fitness Shares Climb as SEC Closes Probe Without Action
While Xponential hunts for a new CEO, a regulatory cloud has lifted as the SEC closes its investigation without action
Xponential Fitness shares surged Thursday after the boutique fitness franchisor disclosed that the U.S. Securities and Exchange Commission (SEC) had concluded its 18-month investigation without recommending action.
The company, which owns popular fitness and wellness franchises including Club Pilates, Pure Barre and Lindora, noted it had been cooperating with the SEC since December 2023, when regulators requested documents related to its business practices. On July 1, Xponential stated that it was informed the inquiry had ended.
The decision marks a turning point for the fitness franchisor, which has spent much of the past year contending with regulatory scrutiny and leadership upheaval. The SEC probe followed a June 2023 short-seller report from Fuzzy Panda Research, which accused the company of inflated performance metrics, allegations that Xponential has consistently denied.
Last August, Xponential lowered its full-year guidance for both revenue and new studio openings, citing a mix of regulatory overhang, leadership transition and broader softness in consumer spending.
Xponential CEO Mark King, the former Taco Bell chief who took over in June 2024 following founder and former CEO Anthony Geisler’s departure, set out to stabilize the company for both short-term and long-term growth, downplaying the need for a full-scale turnaround while emphasizing that the fundamentals remained strong.
“I came here because there was so much good about this business,” King said last August on an earnings call. “The brands are great. The momentum is very positive.”
Although King’s tenure will be short, having announced his plans to retire this past May, he made several executive appointments, sought to restructure franchisee oversight through annual franchisee audits and an improved recruitment strategy, and indicated that he was bullish on international expansion.
A search for Xponential’s next CEO is underway.
While the SEC has closed its case, the status of other federal investigations into Xponential remains unclear. Xponential had disclosed it received notice of a separate investigation by the U.S. Attorney’s Office for the Central District of California on May 7, 2024, followed by a civil investigative demand from the Federal Trade Commission (FTC) on July 29, 2024. Xponential has said it intends to cooperate fully with both agencies.
For his part, Geisler has re-emerged with a new venture, Sequel Brands, a boutique fitness and wellness franchising company that includes Pilates Addiction, iFlex Stretch Studios, Beem Light Sauna and Body20. He’s joined by Sarah Luna, the former president of Xponential, who exited last December and now serves as CEO of Pilates Addiction. The Pilates brand, which recently opened its first studio in West Hollywood, is targeting at least 100 locations over the next 18 months, with expansion already underway in Los Angeles and New York City.
While Sequel Brands currently houses a handful of concepts, Geisler recently hinted that more may be on the way.
“I don’t know if we’ll stop at five (brands) – we’ll see,” he said during a presentation at the ATN Innovation Summit last month.
Geisler has also been active on the policy front, recently visiting the White House to represent the fitness industry in a high-level discussion on improving national health outcomes. The gathering coincided with the release of the Presidential Commission’s “Make America Healthy Again” (MAHA) report.
In a statement sent to Athletech News, Geisler said he was pleased with the SEC’s decision.
“I’m pleased that the SEC has completed its investigation of Xponential Fitness and declined to bring any actions against the company or anyone else – and that this matter is rightfully closed,” Geisler said.
Xponential Fitness declined to comment beyond its SEC filing, which noted that the agency had concluded its investigation without action.