What Happened?
Shares of boutique fitness studio franchisor Xponential Fitness (NYSE: XPOF) jumped 34.1% in the afternoon session after 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.
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What Is The Market Telling Us
Xponential Fitness’s shares are extremely volatile and have had 49 moves greater than 5% over the last year. But moves this big are rare even for Xponential Fitness and indicate this news significantly impacted the market’s perception of the business.
Xponential Fitness is down 28.6% since the beginning of the year, and at $9.96 per share, it is trading 46.1% 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 $812.65.
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