Xponential Fitness Suffers Stock Drop Following CEO Ouster

Actions of Exponential FitnessThe parent company of fitness studios CycleBar and Pure Barre, rebounded in trading on Monday after the company announced late Friday that CEO Anthony Geisler would be suspended indefinitely and become an inactive board member.

The company's shares have plunged nearly 30% since Friday, bringing its market capitalization below $500,000. Shares initially fell another 10% on Monday morning, but have since recovered into positive territory.

Brenda Morris, a board member since 2019, will take over as interim executive director.

Xponential Fitness, which owns more than 3,000 boutique fitness and wellness studios around the world, also said it was notified last week of an investigation by the U.S. Attorney's Office for the Central District of California.

“As far as the investigation goes, it appears that the information requested largely mimics that of the previously disclosed SEC investigation,” said Piper Sandler analyst Korinne Wolfmeyer. Piper Sandler maintains a Hold rating on Xponential Fitness shares, but lowered her price target to $9 from $12. As of Monday, shares were trading at about $9 each.

Xponential Fitness leadership had previously disclosed an SEC investigation in December, which alleged the company provided false and/or misleading information to investors, including unit volume metrics and franchise closures. Shareholders filed a class-action lawsuit related to the allegations against the company in February seeking financial damages.

“The Company intends to continue cooperating with the SEC and intends to cooperate with the USAO,” Xponential Fitness said in a press release announcing the executive changes.

Xponential Fitness also reaffirmed its full-year 2024 guidance, which was previously announced on May 2.

The company did not respond to CNBC's request for comment on the investigation.

“In our opinion, we are pleased that the financial objectives remain intact and that Ms. Morris appears to be a suitable leader for the interim position,” Wolfmeyer said.

However, Wolfmeyer said the company remains cautious.

“We have a hard time supporting this name even after Friday's setback,” he added.