Robbins Geller Rudman & Dowd LLP announces that purchasers or acquirers of F45 Training Holdings, Inc. (NYSE: FXLV) common stock pursuant and/or traceable to F45 Training’s offering documents issued in connection with F45 Training’s July 16, 2021 initial public offering (“IPO”) have until February 6, 2023 to seek appointment as lead plaintiff in the F45 Training class action lawsuit. Captioned Goer v. F45 Training Holdings, Inc., No. 22-cv-01291 (W.D. Tex.), the F45 Training class action lawsuit charges F45 Training as well as certain of its top executives and directors with violations of the Securities Act of 1933.
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CASE ALLEGATIONS: F45 Training is a fitness franchisor with a business model based on rapid growth through the franchising of low-overhead fitness facilities. F45 Training went public in a July 16, 2021 IPO in which it issued 18.75 million shares priced at $16 per share. F45 Training, via its IPO offering documents, asserted its advantage over traditional owner-operated fitness facilities both because its franchise model “has enabled us to open new studios at an accelerated pace versus the owner-operator model” and because it generated quick revenue because “[f]or the majority of franchises that we sell, we receive an upfront payment from the franchisee.”
However, as the F45 Training class action lawsuit alleges, the IPO’s offering documents misled investors regarding F45 Training’s revenue stream and its ability to maintain its rapid expansion business model. Specifically, the IPO’s offering documents failed to disclose that F45 Training could not maintain new franchise growth because it was offering more favorable payment terms to multi-unit franchisees. F45 Training’s lackluster pace of growth was also accompanied by a massive and unsustainable increase in F45 Training’s accounts receivable and a similar, and equally unsustainable, decrease in its cash and cash equivalents. These practices were not sustainable at the time of the IPO and, when F45 Training could no longer sustain this defective business model, its growth rate and revenue plummeted.
On July 26, 2022, a mere year after the IPO, F45 Training revealed: (i) a significant reduction in its financial guidance, from a range of $255 to $275 million to a new range of $120 to $130 million; (ii) a dramatic cut in the number of new exercise studios that it would open in 2022 – down approximately 60%; (iii) a $250 million credit line “will not be available”; (iv) that it was letting go of approximately 45% of its workforce; and (v) that F45 Training’s CEO, defendant Adam Gilchrist, had resigned his position as CEO. F45 Training further disclosed that full-year net franchises sold would be between 350 and 450, a fraction of the prior guidance of 1,500, and that full-year net initial studio openings would be between 350 and 450, compared to the prior guidance of 1,000. As a consequence of F45 Training’s infirm business model and condition existing at the time of its IPO, F45 Training was also forced to substantially slash guidance for the full-year 2022 revenue. On this news, F45 Training’s stock price fell by more than 60%, representing more than a 78% decline from its IPO price of $16 per share.
THE LEAD PLAINTIFF PROCESS: The Private Securities Litigation Reform Act of 1995 permits any investor who purchased or acquired F45 Training common stock pursuant and/or traceable to F45 Training’s offering documents issued in connection with its IPO to seek appointment as lead plaintiff in the F45 Training class action lawsuit. A lead plaintiff is generally the movant with the greatest financial interest in the relief sought by the putative class who is also typical and adequate of the putative class. A lead plaintiff acts on behalf of all other class members in directing the F45 Training class action lawsuit. The lead plaintiff can select a law firm of its choice to litigate the F45 Training class action lawsuit. An investor’s ability to share in any potential future recovery is not dependent upon serving as lead plaintiff of the F45 Training class action lawsuit.
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