Under Armour Investors Approve New Shares as CEO Keeps Control

Under Armour Investors Approve New Shares as CEO Keeps Control

Under Armour Inc. shareholders on Wednesday approved a stock split creating a new class of shares for the company, during a special meeting at company’s Baltimore headquarters. The new class of stock ensures founder and CEO Kevin Plank retains control over the company.

In addition to approving the new class of stock, shareholders also voted in favor of changes to Under Armour’s charter that include a non-compete agreement for Plank, amendments to the company’s incentive plan and Class C stock purchasing options for employees.

Plank agreed to a five-year non-compete agreement and other concessions, which is contingent on the distribution of the new class of stock.

The vote was a formality because Plank controls 67 percent of the voting rights thanks to his ownership of Class B shares, which have 10 times the votes of the Class A shares that outside investors can buy. Investors will receive one share of the new, nonvoting Class C stock for each Class A or Class B share they hold. The move has the effect of a 2-for-1 stock split and allows Plank to sell shares without losing any control.

The Baltimore Business Journal noted that those the stock split and the charter changes won’t take effect until after a related lawsuit is resolved. Shareholders filed a class-action lawsuit against Under Armour June 18 alleging the company’s board members breached their fiduciary duties by recommending the changes. The stock split will be delayed until 10 business days after a judgment is reached in the case.

John Stanton, the company’s senior vice president, general counsel and corporate secretary, declined to discuss the details of the lawsuit when asked about it by a shareholder at the meeting.

“Because it’s a pending lawsuit we really can’t talk about the specifics of it, but our board continues to feel very strongly that this is in the best interest of our stockholders,” he said, according to the Baltimore Business Journal. “We’re working through it but really can’t comment on the specifics of it.”

UA currently has a dual stock structure: Class B common stock has 10 times the voting rights of Class A stock. Plank currently owns more than 35 million shares, mostly Class B common stock, giving him 16.6 percent of the firm’s outstanding common shares and 66.5 percent of the voting power.

Under the company’s capital structure, if Plank’s ownership of total Class A and B shares falls below 15 percent, an automatic dissolution of the dual stock structure would be triggered and Plank would lose his dominant voting power rights. The distribution of the Class C non-voting is designed to postpone that event.