Xponential Refutes Short-Seller Report Allegations, Prompting Stock To Rise
Xponential’s stock fell 37% Tuesday in response to a scathing report issued by Fuzzy Panda Research
Xponential Fitness has issued a statement in response to a short-seller report published earlier this week that caused the boutique fitness franchisor’s stock to drop 37%, denouncing the report as “misleading” and “inaccurate.”
The company’s response has led to XPOF’s stock rising nearly 18% as of Wednesday afternoon.
The boutique fitness franchisor reiterated the strength and health of its fitness business operations:
“Together, the Board of Directors and Management of Xponential denounce the misleading Report, which contains inaccurate information, and caution investors not to rely on it,” the statement reads. “The Board and Management stand firmly behind the strength of the business and health of its franchisees. As the largest global franchisor of boutique fitness brands, we take great pride in our talented team and strong financial results, illustrated by solid and growing average unit volumes and same store sales.”
“Xponential’s scalable business model, strong free cash flow generation and history of margin expansion position the Company for continued success,” the boutique fitness franchisor added.
Mark Grabowski, chairman of the board of Xponential and founder of Snapdragon Capital Partners, the boutique fitness franchisor’s largest investor, also came to the defense of CEO Anthony Geisler, who was personally attacked in the report issued by Fuzzy Panda Research.
“I couldn’t speak more highly of his passion, commitment to excellence and professionalism,” Grabowski said in a statement. “I am confident in the strength of Xponential’s business and the company’s continued execution and creation of long-term shareholder value.”
In the report, Fuzzy Panda Research alleged that more than 50% of Xponential studios never make a positive financial return and that eight out of the boutique fitness franchisor’s ten brands are losing money.
Xponential said its studios remain “open” and “thriving,” adding that in certain circumstances, the company relocates or transitions underperforming studios to other franchisees within its network.
During the transition, the store may be temporarily closed, but Xponential said those stores represent an “immaterial number of stores” when compared to the entire Xponential system.
Regarding franchisee resales, Xponential reiterated that its franchise model has been successful.
“While Xponential has in limited cases repurchased or assumed underperforming studios, this represents a very small number of Xponential’s overall studio system,” the company said.
Xponential also responded to allegations made in the report about a culture of sexual harassment purportedly condoned at the company.
“Xponential maintains a culture committed to diversity and inclusion and the highest ethical standards. 80% of the members of the company’s Board of Directors are women, people of color or individuals identifying as LGBTQ+,” the boutique fitness franchisor said. “The company strongly condemns all forms of hate, prejudice, mistreatment, misconduct and harassment of any kind. The Company has strong policies and procedures in place to address any allegations that are raised, and reviews complaints in line with best practices and in consultation with legal counsel.”
