Please ensure Javascript is enabled for purposes of website accessibility
Early Opportunities
Get in Before the Crowd

June 27, 2023

Xponential (XPOF) Crash

We’ve held one-third of a position in Xponential Fitness (XPOF) after having sold the first third last September for a 28% gain and the second third just last month for a 39% gain. Unfortunately, a short selling outfit going by the name of Fuzzy Panda Research came out with a report yesterday afternoon that has sent shares of XPOF through the floor today.

The link to that report is here.

As with most short reports this one sounds awful and makes a number of allegations that, if true, are damning for the company and for management. Big if. I expect management and some of the many analysts following XPOF will come to the company’s defense soon.

Also, as with most short reports it seems the selling is overdone. Only time will tell if this reaction is right or not, but it won’t change what we do in the short-term.

In my view we have been winding down our position anyway and this is just one more reason to move on. I don’t see much reason to think about the long game right now. The lawyers will jump on this right away and it’s going to be a drag. There are plenty of other opportunities out there. So XPOF is moving to sell today.

That all said, there is a decent chance shares of XPOF bounce back some before this is resolved one way or the other. So I wouldn’t argue with anybody that gradually winds down a remaining position. SELL

Tyler Laundon is chief analyst of the limited-subscription advisory, Cabot Small-Cap Confidential and grand slam advisory Cabot Early Opportunities. He has spent his entire career managing, consulting and analyzing start-up and small-cap companies. His hands-on experience has taught Tyler that the development of a superior business model is the biggest factor in determining a company’s long-term success. Accordingly, his research focuses on assessing the viability of management’s growth strategies, trends in addressable markets and achievement of major developmental milestones.