F45 to 'go dark' as low trading price prompts delisting

F45 to 'go dark' as low trading price prompts delisting

Photo: F45.

Australian-born workout franchise sensation F45 (NYSE: FXLV) has announced it will delist from the New York Stock Exchange after filing delays for its financial reports and a languishing share price that has traded below the US$1 mark since April.

Founded in Paddington, Sydney in 2012 by Rob Deutsch, Luke Istomin and Adam Gilchrist, F45 received backing from Hollywood star Mark Wahlberg in 2019 and listed in mid-2021 with its share price soon hitting a high of US$17.28, equivalent to a $1.5 billion valuation.

As the fastest-growing fitness franchise in the world at the time, in July 2022 the group announced a strategic review aimed at cutting costs by $15-20 million per quarter, while earnings guidance for the calendar year was cut by around two-thirds to $25-30 million.

The strategic review and earnings downgrade came as guidance for new franchise sales were slashed from 1,500 to 350-450, and founder CEO and president Adam Gilchrist (who is not the test cricketer) stepped down.

Around four months later the group reported a quarterly loss of $60 million and announced the formation of a special committee to evaluate alternatives for the company as a potential US$4 per share takeover offer was on the table from Kennedy Lewis Investment Management (KLIM) - a level that was 76 per cent lower than share price highs seen in the previous year.

A week after the special committee was appointed, then chief financial officer Chris Payne resigned to address immediate personal and family matters in Australia, although he remained on the board.

Within three months of Payne's executive departure, in February 2023 the company secured a new $90 million subordinated debt facility provided by a consortium of existing investors, led by affiliates of Kennedy Lewis Management, alongside a refresh of the board involving the replacement of three directors.

In April 2023 the group received a notice it was not in compliance with listing rules as it had failed to file its annual report on time, and was given until the end of September to file its 2022 results with the US Securities and Exchange Commission (SEC) in a Form 10-K.

"Since receipt of such notice, the company’s common stock has generally continued to trade below $1.00 per share," F45 said in an announcement this week.

"In response, the company has evaluated whether to remain listed or to go dark and has determined that going dark is the best path for the company due to the expected substantial cost savings and the company’s current inability to realise the traditional benefits of public company status. 

"The company’s continued low trading value, and the resulting low trading price, affects the company’s ability to raise capital from the public markets, effectively use its securities as transaction consideration or attract interest from institutional investors or market analysts."

Meanwhile, F45 also must continue to pay for "significant annual expenses and indirect costs" associated with being a public company, but expects delisting will lead to substantial cost savings.

"The company also believes the reduction in time spent by its management and employees complying with the requirements applicable to SEC reporting companies will enable them to focus more on managing the company’s businesses, strengthening relationships with franchisees and vendors and growing stockholder value," the group said.

"The company will continue to focus on long-term growth, but without the distraction of short-term financial results and stock price movement."

F45 expects to file the relevant form for delisting on around 24 August, and anticipates the process to be completed in early September.

F45 shares last traded at US$0.12, implying a valuation of US$11.9 million.

 

 

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