Under Armour last Monday "unveiled a plan that would preserve" Founder, Chair & CEO Kevin Plank's personal control of the company, and the move is "raising eyebrows," according to Lorraine Mirabella of the Baltimore SUN. UA's board "approved an unusual two-for-one stock split that would create a new class of stock without voting rights and give owners of each existing share of common stock one new share of the new class." While the split "essentially preserves Plank's control even as he sells off some of his shares, some experts called it bad corporate governance." ValueEdge Advisors Vice Chair Nell Minow said, "They want the access to the capital of a public company and the control of a private company. It's a win-win for them, but not so great for shareholders. Why anybody would want to participate in that, I do not understand. … I would expect there will not be a lot of interest in buying it." Mirabella noted UA since going public in '05 has "operated with a dual-class stock structure in which Plank owns most of the Class B shares, which are equal to Class A shares but have 10 times the voting rights." But that structure is "slated to end when Plank's overall share ownership dips below" 15%, which would "trigger the automatic conversion of all Class B shares to Class A." Plank now "owns more than 35 million shares of mostly Class B stock," or 16.6% of outstanding common shares, with 66.5% of the voting power. Plank as part of the stock split "agreed to support governance changes, including, for the first time, signing a noncompete agreement that would last five years if Plank leaves the company and agreeing to a cap on the number of shares he can sell in any year" (Baltimore SUN, 6/21).
