What Happened?
Shares of boutique fitness studio franchisor Xponential Fitness (NYSE: XPOF) jumped 3.4% in the pre-market session after the company announced it had completed the divestiture of its CycleBar and Rumble brands. The fitness franchisor sold the two brands to Extraordinary Brands, LLC, as part of a strategic realignment. Xponential Fitness stated that the transaction was consistent with its plan to focus resources and capital on its more profitable brands. In a statement, CEO Mark King emphasized that the company would concentrate on brands that drove both current and long-term profitability. This move was presented as a strategic effort to improve the company's financial performance and provide better support for its core, higher-performing franchises.
After the initial pop the shares cooled down to $11.01, up 2.3% from previous close.
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What Is The Market Telling Us
Xponential Fitness’s shares are extremely volatile and have had 50 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 25 days ago when the stock gained 34.1% on the news that the company announced that the U.S. Securities and Exchange Commission (SEC) has concluded its investigation into the company without recommending any enforcement action.
The investigation, which began in December 2023, had been a significant overhang on the company's stock, which has fallen approximately 45% year-to-date. The probe was initiated after the SEC requested documents related to potential securities fraud and accounting issues. In a filing, Xponential stated it was informed on July 1 that the investigation was concluded and that no action would be taken. The company noted it had fully cooperated with the regulator over the past 18 months. This news removed a major cloud of uncertainty for investors, leading to a surge in confidence as reflected in the pre-market rally.
Analysts at Jefferies noted that with the probe now cleared and new leadership in place, investor sentiment should improve, potentially allowing the stock's valuation to rise toward peer levels as the company focuses on its growth plans.
Xponential Fitness is down 21.1% since the beginning of the year, and at $11.01 per share, it is trading 40.4% below its 52-week high of $18.47 from February 2025. Investors who bought $1,000 worth of Xponential Fitness’s shares at the IPO in July 2021 would now be looking at an investment worth $898.78.
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