Xponential Fitness Faces Class Action Lawsuit Over Alleged Securities Fraud
Xponential Fitness is now facing a class action lawsuit over allegations of securities fraud. The lawsuit, filed in the United States District Court for the Central District of California, claims that Xponential Fitness, Inc. (NYSE: XPOF) and certain officers violated the Securities Exchange Act of 1934. Investors who bought or acquired Xponential’s Class A common stock between July 26, 2021, and December 7, 2023, are the target of this legal action.
The lawsuit alleges that the company did not fully disclose the financial struggles of many of its franchisees, which significantly affected its revenue. The complaint further states that the majority of the company’s studios were unprofitable, resulting in closures and over 100 franchisees being put up for sale at reduced prices.
Xponential Fitness is being accused of misleading practices to recruit new franchisees, including false promises of strong financial returns, deceptive claims about past studio performance, and assurances of corporate support. All of this allegedly inflated investor funding.
These issues came to light following a report by Fuzzy Panda Research on June 26, 2023, and were corroborated by a Bloomberg Businessweek exposé published on December 7, 2023. The Businessweek article featured testimonies from former business partners, employees, and franchisees, all highlighting the company’s practices that led to financial distress. After the exposé, Xponential’s stock price dropped by 13% on December 8, 2023.
Investors who have invested in Xponential Fitness now have until April 9, 2024, to file a motion with the court if they wish to be the lead plaintiff in the class action. However, serving as the lead plaintiff is not a requirement to participate in any potential recovery. The lawsuit is currently being managed by Bernstein Liebhard LLP.
Analyst comment
Negative news: Xponential Fitness is facing a class action lawsuit over allegations of securities fraud, with claims that it did not disclose the financial struggles of its franchisees and misled investors. The market is likely to react negatively, with decreased investor confidence and a potential decline in Xponential’s stock price.
