(Reuters) – Shares of Xponential Fitness slumped nearly 34% on Tuesday after short-seller Fuzzy Panda Research alleged that the boutique gym chain has misled investors by “hiding” the losses of its brands and franchisees.
Fuzzy Panda, in a report made public on Tuesday, revealed its short position on the company. It said more than half of Xponential’s studios did not make a positive financial return, and eight out of 10 brands were losing money monthly, according to its review of 64 franchise disclosure documents (FDD).
It also said that CEO Anthony Geisler had made “false claims” that Xponential had never closed a store, but it discovered that more than 30 stores had been closed permanently.
Xponential Fitness did not immediately respond to a Reuters request for comment on the report.
Shares of the company tumbled to a more than 10-month low of $16.59 in morning trade. If current losses hold, the stock would record its worst ever session.
Fuzzy Panda said some franchisees told the short seller the “losses were so bad that they sold their studios back to Xponential for $1,” adding it has found more than 100 franchises for resale at a discount of over 75% to the initial cost.
Xponential has more than 2,700 fitness studios, including Cyclebar and Club Pilates brands, according to its website.
(This story has been refiled to correct syntax in the headline and paragraph 1)
(Reporting by Deborah Sophia in Bengaluru; Editing by Shinjini Ganguli)