NEW YORK - A class action lawsuit has been filed against Xponential Fitness, Inc. (NYSE: XPOF), a franchisor of boutique fitness brands, alleging securities fraud, according to a statement released today. The suit, lodged in the United States District Court for the Central District of California, claims the company and certain officers violated the Securities Exchange Act of 1934.
Investors who purchased or acquired Xponential's Class A common stock between July 26, 2021, and December 7, 2023, are the focus of the lawsuit. The complaint asserts that Xponential did not fully disclose that many of its franchisees were struggling financially, which had a significant impact on the company's revenue. It is alleged that a majority of the company's studios were unprofitable, leading to closures and over 100 franchisees being put up for sale at prices well below their initial costs.
Despite these challenges, the lawsuit accuses the company of engaging in misleading practices to recruit new franchisees, including false promises of strong financial returns, deceptive claims about past studio performance, and assurances of corporate support. These actions allegedly allowed Xponential to raise funds from investors at inflated prices.
The allegations came to light following a report by Fuzzy Panda Research on June 26, 2023, and were further corroborated by a Bloomberg Businessweek exposé published on December 7, 2023. The Businessweek article detailed accounts from former business partners, employees, and franchisees, painting a picture of a company that led many into financial distress. Following the publication of the Businessweek article, Xponential's stock price dropped by 13% on December 8, 2023.
Those who have invested in Xponential Fitness and wish to serve as lead plaintiff in the class action have until April 9, 2024, to file a motion with the court. Serving as lead plaintiff is not a prerequisite for participating in any potential recovery.
The legal action is being handled by Bernstein Liebhard LLP, a firm with a history of recovering over $3.5 billion for its clients since 1993. The information regarding the lawsuit is based on a press release statement issued by the firm.
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