In what some have dubbed a power move on the part of founder, chairman and CEO Kevin Plank, Under Armour Inc. has announced the creation of a new non-voting Class C common stock.
The new stock will have the same effect as a two-for-one stock split and will be issued through a stock dividend to all existing holders of Under Armour’s Class A and Class B common stock, the firm said in a release.
Market watchers, however, have been hung up on the shares’ exception — they do not come with voting rights and will essentially allow Plank to retain a strong influence over the Baltimore-based company for much of the foreseeable future.
Plank sent a letter to shareholders yesterday in which he made a case for his and the board of directors’ desire to “maintain Under Armour’s founder-led approach” as it is “in the best interest of Under Armour and all of its stockholders.”
“I love Under Armour, and I would like stockholders to know that I am very committed to our company,” Plank wrote. “Through my ownership of my founder’s shares, I have benefited, along with all of Under Armour’s stockholders, from the incredible growth we have realized in the value of Under Armour’s stock over the years.”
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Plank went on to say that his “personal long-term financial success does not come from my compensation as CEO, but is driven almost entirely by the performance and success of our stock.”
The firm’s share price has seen some gains following the announcement, with some saying the implication is that shareholders are generally unopposed to the move.
“Plank’s long-term vision, patience, methodical growth and commitment to the brand have been the recipe for the company’s — and stock’s — success,” wrote Stern Agee CRT analyst Sam Poser in a note on June 16. “We agree with this move, which, in our view, limits the risk in the direction of the company. If you like what [Under Armour] has done, you’ll want to keep the same game plan.”
Poser went on to say that Under Armour’s success, both for shareholders and customers, has been the direct result of Plank’s “long-term brand vision and methodical approach.”
In his letter, Plank pointed to governance changes to which he agreed that should ensure continued alignment with stockholders. The changes include a cap on how many shares he can sell in any year while maintaining the dual-class voting structure and a noncompete agreement that would last for five years should he leave the company.
The firm’s board of directors has called a special meeting of Under Armour’s stockholders on Aug. 26 to approve certain amendments to Under Armour’s charter.