Xponential Fitness Faces Escalating Legal and Financial Crises as Investigations Intensify

Xponential Fitness, Inc. (NYSE: XPOF), the operator of boutique fitness brands such as Club Pilates and CycleBar, has become a focal point of legal and financial scrutiny in 2025. The company is under investigation by the U.S. Attorney’s Office, the SEC, and multiple law firms, including Pomerantz LLP and Glancy Prongay & Murray, for potential securities fraud, accounting misstatements, and misleading investors. These developments have intensified pressure on XPOF’s leadership, stock performance, and long-term viability.

The Legal and Financial Crisis Unfolds

Pomerantz LLP’s April 2025 investigation, launched on behalf of investors, centers on XPOF’s March 13, 2025, announcement of restated 2023 financial results. The restatements revealed $6.4 million net loss—a sharp increase from the originally reported $1.7 million—and a $5 million reduction in Adjusted EBITDA to $100.3 million. These corrections, attributed to errors in accrued inventory, 401(k) compliance, and vendor rebates, directly precipitated a 38.45% single-day stock decline (from $12.12 to $7.46 on March 14, 2025).

The legal actions extend beyond Pomerantz. Glancy Prongay & Murray has also initiated an investigation into potential securities law violations, citing the same financial misstatements and emphasizing the role of ongoing SEC and DOJ probes. These probes, first disclosed in May 2024, stem from earlier allegations that XPOF obscured systemic financial weaknesses:
- Over 80% of its brands lost money monthly, with half of all studios never turning a profit.
- Over 100 franchises were listed for sale at 75% below their original cost, and at least 30 locations were permanently closed—contradicting claims of “never closing” studios.
- Over 60% of revenue stemmed from one-time fees, not recurring streams.

Historical Context: The Seeds of Crisis

The current turmoil traces back to a June 2023 report by Fuzzy Panda Research, which exposed franchisee financial distress and alleged deception by XPOF. The company initially dismissed the report as “misleading,” but subsequent investigations have largely validated its claims. By May 2024, XPOF’s CEO, Anthony Geisler, was suspended amid the U.S. Attorney’s probe, and two senior executives departed, further destabilizing leadership.

Investor Risks and Implications

Investors face significant risks:
1. Ongoing Litigation: Class-action lawsuits, including City of Taylor v. XPOF, seek to recover losses for shareholders misled by allegedly false statements about profitability and growth. Over 70 plaintiffs had already joined the case by April 2024, with more likely to follow.
2. Accounting Irregularities: The restatements suggest poor financial controls, raising questions about governance and executive accountability.
3. Stock Volatility: The March 2025 decline left XPOF’s stock at $7.46, down 58% from its 2022 IPO price of $17.50.

Management’s Challenges and Outlook

XPOF’s interim CEO, Brenda Morris, has reaffirmed 2025 financial guidance of $315–325 million in revenue and $120–125 million in Adjusted EBITDA. However, these projections face skepticism given:
- Declining Revenue: A 7.7% year-over-year revenue drop in 2023 (to $320.3 million).
- Operational Headwinds: The company’s reliance on franchising—a model increasingly scrutinized for its risks—has led to unsustainable debt for franchisees and closures.

Conclusion: A High-Risk Investment with Uncertain Returns

XPOF’s situation underscores the dangers of prioritizing growth over transparency. The restated financials, legal investigations, and leadership upheavals paint a picture of a company struggling to manage its franchise model and investor expectations. With $6.4 million losses and a stock price down nearly 60% since its IPO, shareholders face substantial risks.

The SEC and DOJ probes, alongside class-action lawsuits, could lead to hefty fines, settlements, or even criminal charges against executives. For investors, the path forward is fraught with uncertainty. Until XPOF demonstrates improved financial controls and transparency, the stock remains a high-risk bet. The data— plummeting stock prices, corrected losses, and systemic operational failures—suggest caution is warranted.

As the legal battles unfold, one question remains paramount: Can XPOF rebuild trust, or will its fitness empire falter under the weight of its own mismanagement? The answer will likely come at the cost of further shareholder losses.