Venture capitalists are banking on the return of group workout classes and personal training.
Xponential Fitness Inc., the boutique fitness brand behind workout studios like Rumble and Pure Barre, has filed paperwork for an IPO.
The Irvine-based company announced that it's going public on Monday and will trade on the New York Stock Exchange under the ticker symbol XPOF.
The company, which listed its placeholder offering at $100 million. had been making plans to offer an initial public offering a year ago. But it was reportedly forced to put off those plans as the COVID crisis struck, forcing gyms across the world to shut down.
Bank of America Corp., Jefferies and Morgan Stanley are leading the deal. Pricing terms were not disclosed, but a Bloomberg report from April, citing unnamed sources, said it will be valued at close to $1.3 billion.
The company declined to comment on the company's IPO or Bloomberg's previous report.
Xponential pitches itself as the country's "largest boutique fitness franchisor." Since its founding in 2017, the company has built and acquired nine studios in 48 states and 10 countries outside the U.S., according to a statement announcing the IPO. As of March 2021, it operated 1,775 storefront locations, according to SEC paperwork.
The company acquired its first two workout brands in September 2017 and has since nabbed franchise partners including CycleBar, Stride and most recently, the boxing brand Rumble. Those acquisitions gave it access to training studio instructors and enabled the company to provide brands with marketing and tech support.
As vaccination rates pick up — and states ease restrictions on gyms and other indoor venues — the company predicts consumers will return to boutique, in-person fitness classes in the second half of 2021.
The pandemic stunted indoor workout companies across the nation. But as consumers stayed home to exercise, home gym equipment sales soared, according to Pitchbook data. Most VC investment in 2020 was driven by these at-home fitness products and technology like cycling bikes and activity-tracking wearables also hit a stride.
Xponential followed the trend, launching a digital platform and streaming free workouts on Facebook and Instagram. The company lost revenue but continued to open new studios and sell franchise licenses.
The global physical activity economy — the market including fitness tech and equipment among other categories — is expected to hit $1.1 trillion by 2023, according to a recent report from Pitchbook.
In what is partly a reflection of the area's red-hot tech scene and also this year's sizzling IPO market, FIGS, seller of fashionable scrubs, became the latest Southern California company to do what is very much in fashion these days: go public.
FIGS shares closed Thursday on the New York Stock Exchange at $30.02 a share, a hefty premium to the $22 listing price.
FIGS' IPO came just a day after another Santa Monica-based ZipRecruiter debuted via direct listing on the NYSE.
Meanwhile, Fifth Wall, a proptech-focused VC, had its third SPAC debut on the NYSE Thursday. Officially called Fifth Wall Acquisition Corp. III, the offering raised $275 million.
It was a banner week for Southern California startups.
While many investors have eschewed money-losing direct-to-consumer brands in recent years, FIGS was able to turn a $50 million profit last year. It also grew net revenues from $17.6 million to $263.1 million from 2017 to 2020, according to regulatory filings.
"The firm's business model appears to be working extremely well, generating both high growth and profits, an unusual combination in pre-IPO companies," Donovan Jones wrote in an analyst note recommending the stock. "Free cash flow for the trailing twelve months was an enviable $37 million."
Co-CEO and co-founder Heather Hasson previously started an upscale handbag company. She got the idea for FIGS over a decade ago after she had coffee with a friend who was a nurse practitioner and was incredulous to see her spending 16-hour days wearing uncomfortable scrubs. Hasson later teamed with co-CEO and co-founder Trina Spear, who was previously an associate at the Blackstone Group, to offer healthcare workers a better alternative.
ZipRecruiter, which was founded in 2010, chose a direct listing because it is the rare startup that did not need to raise capital.
"We have more cash in the bank right now than we've ever raised in primary capital in our company's history," CEO Ian Siegel bragged to Crunchbase News.
The company's thriftiness has proven a windfall for its founders who were able to retain most of their shares in the company, but it left some investors marveling what could have been.
Jim Adelman, co-founder of Bonfire Ventures & Rincon Venture Partners, said he offered the founders a term sheet in 2011 but they elected to go the bootstrap route instead.
"That investment would be worth $400M today," Adelman tweeted. "Sigh."
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Dealmaking in the frenzied cannabis market continues to flourish with the latest megadeal announced Thursday. Investors aim to build a Coca-Cola or Hershey of marijuana, launching the first national pot brand in the United States.
Glass House Group, a vertically integrated California-based cannabis company, is being gobbled up by Mercer Park Brand Acquisition Corp., a Canadian SPAC —or Special Purpose Acquisition Company — for $576 million.
The combination will create the most expansive fully-integrated, publicly listed cannabis business in California, with plans to build a six million square foot greenhouse, the biggest in the state.
The deal comes after Century City-based Ceres Group Holdings announced a SPAC in February to take Atlanta-based cannabis producer Parallel public in a $1.88 billion transaction.
Related: What Is a SPAC?
Ceres has also been trying to close a separate deal to raise a $100 million fund to make other cannabis investments, especially those in Los Angeles.
The Ceres SPAC, like Mercer Park's, trades on Canadian exchanges because U.S. cannabis companies are still barred from listing their shares on major U.S. stock exchanges as marijuana is still illegal at the federal level.
But with President Biden taking over the White House, cannabis investors are optimistic he will ease restrictions, following the lead of many states.
Earlier this month, New York became the 15th state to legalize recreational marijuana.
The possibility of federal legalization as well as record amounts of blank check deals led to $600 million in capital raised for cannabis companies in the first quarter of 2021, the highest level since 2019, according to Viridian Capital Advisors.
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