Under Armour agrees to $434m settlement in shareholder fraud lawsuit

Under Armour said on Friday that it had decided to pay $434 million to reimburse a 2017 class action case blaming the sports apparel maker of cheating shareholders about its earnings growth to meet Wall Street predictions.

Settlement Details

Under Armour announced on Friday that it has agreed to a $434 million settlement to resolve a 2017 class action lawsuit. The lawsuit accused the sports apparel maker of defrauding shareholders by misrepresenting its revenue growth to meet Wall Street forecasts.

This proposed settlement, which is pending court approval, avoids a scheduled trial set for July 15 in Baltimore federal court.

Allegations Against Under Armour

The shareholder lawsuit claimed that Under Armour and its CEO, Kevin Plank, intentionally misled investors about the company’s financial health.

This follows a 2021 settlement where Under Armour paid $9 million to settle SEC charges that it misled investors regarding its revenue growth.

The SEC investigation revealed that Under Armour had employed a sales tactic to accelerate or “pull forward” a total of $408 million in existing orders during the second half of 2015, failing to disclose this practice to investors.

Statements from Parties Involved

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Mark Solomon, the lead counsel for the shareholders and a partner at Robbins Geller Rudman & Dowd, hailed the proposed settlement as an “important win” that emphasizes the critical role of pension funds in holding companies accountable.

Under Armour, on the other hand, has consistently denied the accusations. The company stated that it entered into the agreement in principle, which does not constitute an admission of fault or wrongdoing.

Financial Implications for Under Armour

Under Armour intends to fund the $434 million settlement using its cash reserves and by drawing from its $1.1 billion revolving credit facility.

According to a regulatory filing, the company will also continue to separate the roles of chair and chief executive officer for at least three years.

The company expects its total accrual in legal proceeding contingencies related to the lawsuit to reach $434 million in the first quarter of fiscal year 2025, up from $100 million at the end of fiscal 2024.

This substantial settlement marks a significant financial and operational adjustment for Under Armour, reflecting the company’s effort to resolve past legal challenges and move forward with a clear governance structure.

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