Under Armour (NYSE: UA), Inc., one of the leading sportswear companies in the United States and the entire world, based in Baltimore, Maryland, has reached a staggering $434 million settlement to settle a class action lawsuit. The company recently filed this information with the U.S. Securities and Exchange Commission (SEC).
The lawsuit, which originated in early 2017, included allegations about alleged accounting practices and misleading disclosures in the company’s sales. These claims covered the period between the third quarter of 2015 and the fourth quarter of 2016. Both Under Armour and its CEO, Kevin Plank, were charged with violating Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.
Under Armour to Pay $435M: Who Gets a Share of the Pie?
The company has stressed, and again stressed its immovable position: the agreement reached does not imply an admission of guilt on the part of Under Armour or Plank. However, the company has committed to pay $434 million to class A and C shareholders who purchased shares between September 16, 2015 and November 1, 2019.
According to the latest financial report, as of March 31, 2024, Under Armour had $858.7 million in cash and equivalents and has not used its $1.1 billion revolving credit facility.
In addition to the financial outlay, Under Armour has agreed to implement changes to its management structure. For at least three years after the final court order, the company will maintain separate roles for the president and the CEO. In addition, performance-based vesting conditions will be imposed on share awards granted to key executives during this period.
Under Armour’s Agreement to Pay Hundreds of Millions Still Needs to Go One Step Further
The class action settlement is subject to preliminary and final approval by the District Court. This process will include a notification and review period for the members of the affected group. Under Armour had previously provided $100 million for legal contingencies related to this case and expects to reach the full settlement sum in the first quarter of fiscal year 2025.
The company plans to use its cash reserves and possibly resort to loans to cover the deal. In addition, it is expected that part of the cost will be covered by insurance, although litigation with insurers still persists.
“We firmly believe that our sales practices, accounting practices, and disclosures were appropriate, and deny any wrongdoing in this case,” said Mehri Shadman, Under Armour’s Chief Legal Officer and Corporate Secretary.
“Today’s announcement allows us to move past this more than seven-year-old matter so we can avoid the ongoing distraction of litigation and provide certainty to the business at a time when we are executing on important strategic priorities,” the company executive added in the statement.