Fund 1 Proposes Cash Buyout of Xponential Fitness at Up to $7 a Share
Key Facts
Fund 1 Investments submitted a nonbinding indication of interest to Xponential Fitness's board on October 30 to acquire all outstanding shares for cash and take the company private, according to a filing with the U.S. Securities and Exchange Commission. The investment firm set an initial range of $5.61 to $7 a share. It said the low end of the range is 50% above the stock's October 29 closing price of $3.74. The proposal offers shareholders a price above the reference price Fund 1 used, but does not constitute an agreement to sell. The potential deal remains at an exploratory stage, pending board review, satisfaction of conditions and negotiations.
Fund 1 said any transaction would be subject, among other things, to review and approval by the board, completion of due diligence, availability of financing and agreement on mutually acceptable definitive documents. It added that the definitive agreements would not include a financing condition, while closing would remain subject to financing being available. The price range leaves room to determine final consideration after reviewing the company and discussing details with the board. The letter therefore does not establish that the parties have agreed on a price or that the acquisition will be completed. The board's role remains central to evaluating the proposal as part of the ongoing strategic review.
Fund 1 disclosed economic exposure of approximately 19.9% of the Class A shares, consisting of 4,170,610 shares it owns, equivalent to about 9.9% of shares outstanding, and cash-settled total return swaps linked to a notional 4,213,826 shares, or about 9.98%. This exposure combines direct ownership with financial instruments that do not necessarily amount to ownership of the shares referenced in the swaps. The investment firm said it was open to other shareholders participating in the acquisition, provided it retained a majority stake. It tied the scope of that participation to the board's strategic process. It also asked the board to explore a cash acquisition and said it would seek a waiver from the October 12, 2026 shareholder rights agreement to contact shareholders who might wish to participate.
Fund 1 framed its proposal against a decline in Xponential's stock from $6.76 on April 6 to $3.74 on October 29, 2026. The investment firm attributed pressure on the valuation to weak same-store sales, leverage and legacy issues. This is Fund 1's account of the reasons for the decline, not an independent description of the company's performance. The shares closed at $4.46 on October 30, according to EL7 data. In separate coverage of the market move that day, Reuters reported the stock rose 12%, while another report cited a 19% gain after news emerged of the investor's buyout interest.
Xponential began a review of strategic alternatives on April 6, 2026, including a potential sale or merger, led by independent board members and advised by Jefferies. Fund 1 said no progress in the review had been announced after more than six months, a point made by the proposal's author. In its letter, it presented private ownership as a way to focus on restoring studio-level demand, generating free cash flow and strengthening the balance sheet away from the pressure of quarterly reporting and public-market investor requirements. The company operates five brands, and its franchise and international expansion agreements cover 49 U.S. states, Puerto Rico and 29 other countries. Fund 1 also cited its experience with previous acquisitions, including L'Occitane, completed in October 2024, and Tile Shop Holdings, completed in December 2025.
Potential discussions come as Xponential's results showed declining revenue: net revenue in the second quarter of 2026 fell 13.4% to $65.968 million from $76.208 million in the same period of 2025. For the first half, revenue declined 17.3% to $126.682 million, compared with $153.091 million a year earlier. As of June 30, 2026, the company reported $499.524 million in net long-term debt, in addition to $10 million on its line of credit. Debt was one of the factors Fund 1's letter cited in describing valuation pressures. The filing did not specify a date for a board decision or the next step in the review, while Fund 1 said participation by other shareholders would be determined through the board-led process.