Irvine-based Xponential Fitness Inc. (NYSE: XPOF) yesterday revealed a document request from the Securities and Exchange Commission and was the subject of a Bloomberg News article questioning its business model.
Shares today recuperated 2.6% to $9.22 after dropping 15% yesterday following the news. Xponential shares are down more than 70% since a 52-week high of $33.58 in April.
Xponential didn’t disclose what documents were requested by the SEC, except to say they were immaterial.
“The company does not otherwise intend to provide additional information regarding this matter unless and until it believes there is a material development that warrants public disclosure,” Xponential said in its filing.
The company said its disclosure was made because it was contacted by an unidentified journalist about the SEC request before it was formally notified by the SEC. The company said it intends to “cooperate fully” with the SEC.
Xponential franchises about 3,000 workout studios like Club Pilates and Pure Barre.
Under a headline that Xponential has “turned suburban moms into bankrupt franchisees,” Bloomberg today reported that it spoke with more than 30 former and existing franchisees, including some who are in active litigation with the company. It said more than 100 franchisees have signed on to a potential class action lawsuit against Xponential.
The company rejected accusations in the Bloomberg article, saying its prospective franchisees are warned about financial projections and risks.
The Bloomberg article cited some claims from an anonymous short seller who last June claimed Xponential was a “house of cards.”
For a longer article on Xponential expanding into the weight management industry, see this week’s Business Journal.