F45 Stocks are Plunging, So You Can Forget About Burpees This Week
Australian-founded fitness franchise F45 Training has been thrown into damage control after the business’ stock price plunged on the New York Stock Exchange. The fall comes immediately after the Mark Wahlberg-backed fitness and gym enterprise announced that the company’s CEO, Adam Gilchrist would be stepping down, with a further 110 employees set to be laid off. As the share price continues to fall, the business’ global ambitions are currently in shambles with the unfolding disaster seemingly coming out of nowhere.
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According to MarketWatch, F45 shares dropped more than 60 per cent on Wednesday evening, falling to just USD$1.31 (AUD$1.87) on the New York Stock Exchange after it announced it had “slashed its expansion plans”. The move was reportedly made in an effort to prioritise profitability and cashflow generation in response to the challenging economic conditions worldwide. Co-founder Rob Deutsch, who stepped down as F45’s chief executive and sold his shares in the company in 2020, took to Instagram on Thursday to share his condolences to the axed employees.
“Never in my wildest dreams could I have imagined this. When I exited, and sold out of F45, I left a healthy, phenomenal, beast of a business. All the way from the company culture to the heartbeat of the business,” Rob Deutsch wrote. “I genuinely hope all of the 110 layed-off staff find happiness and opportunities elsewhere. For those OGs, I want to personally thank you for your blood, sweat and tears. You are the reason F45 was special.”
F45 New York Stock Exchange
The sharp fall in stock price is far cry from the lofty heights that F45 achieved last year when the fitness franchise was first listed on the NYSE. At the time, the move was a major win for investors and reportedly netted Gilchrist a whopping $500 million overnight. Further investment from Holywood heavyweight Mark Wahlberg continued to swell interest in the business, with the Transformers actor taking a large stake in the Australian-founded enterprise.
“Die-hard fitness enthusiasts who don’t have the schedule, got to do it in the middle of the night or first thing in the morning, don’t want to get on a bike. That’s fine. But eventually that becomes, stagnant and boring,” Wahlberg told CNBC ahead of the F45 trading debut in 2021. “You want to be in there with the energy of people working out with you, alongside you, inspiring you, pushing you and supporting you. The energy is absolutely incredible.”
Unfortunately for F45, however, the dream run didn’t last long. In March, Wahlberg reportedly sold 1.1 million of his shares in F45 Training for a staggering USD$12.2 million (AUD$17.45), according to AFR columnist Joe Aston.
The F45 Story
The F45 story has long been a benchmark for Australian entrepreneurship, starting out with just one gym in Australia less than 10 years ago. Built on the foundation of High-Intensity Interval Training (HIIT) loaded into 45-minute functional sessions and circuit training, the gym model was easily replicated across the country and it wasn’t long before international expansion became the goal. In 2020, F45 Training jumped six spots to #13 on Entrepreneur’s list of Fastest Growing Franchises with the business’ official franchisee recruitment website claiming to have 1,700 studios in the global network.
Backed by a massive team and a host of A-list investors, including sporting greats like David Beckham and Magic Johnson, the functional fitness business has transformed into a worldwide phenomenon with cult-like following. However, the writing appeared on the wall on Wednesday when F45’s 2022 revenue guidance was downgraded by 53 per cent, with full-year earnings guidance also downgraded by 71 per cent. By Thursday, a disaster was shaping, confirmed with the announcement that Gilchrist would step down as CEO (however will retain a board set), with around 45 per cent of the company’s workplace to lost their jobs.
F45 Finance & Future
“We are taking the necessary steps to right-size our business in light of shifting macroeconomic and business conditions,” F45 chief financial officer Chris Payne, said via the SMH. “In addition, recent share price performance has made it challenging for franchisees to utilise financing facilities announced earlier this year.”
The fitness chain, which currently boasts outlets in 48 countries around the world, was originally expected to list on the US Nasdaq exchange via a special purpose acquisition last year, however, was interrupted by the COVID-19 pandemic. With a revised downgrade and a swathe of exits on the way, the fitness chain finds itself in an interesting position. The real challenge will be facilitating the needs of members and a network of rightly anxious franchisees.
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