Under Armour Settles Class Action Lawsuit for $434 Million

Under Armour has agreed to a $434 million settlement to resolve a 2017 class action lawsuit that accused the firm of misleading shareholders about its revenue growth to meet Wall Street forecasts.

This settlement, pending court approval, prevents the trial scheduled for July 15 in Baltimore federal court.

Allegations and SEC Investigation:

The lawsuit alleged that Under Armour and its CEO, Kevin Plank, deliberately misled investors about the company’s financial health. The claims centered on the company’s practice of accelerating or “pulling forward” $408 million in existing orders in the second half of 2015 to appear to meet revenue growth targets.

In 2021, Under Armour settled with the Securities and Exchange Commission (SEC) for $9 million over similar allegations. The SEC found that the company had failed to disclose these tactics to investors.

Significance of the Settlement:

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

Under Armour plans to pay the settlement amount through its available cash and draw on its $1.1 billion revolving credit facility.

The company will account for this settlement in its legal contingencies, increasing the total accrual to $434 million in the first quarter of 2025 from $100 million at the end of fiscal 2024.

Corporate Governance Changes:

Under Armour has committed to maintaining separate roles for the chair and the chief executive officer for at least three years as part of the settlement. This move is likely to enhance corporate governance and transparency.

Under Armour has consistently denied the allegations and stated that entering into this settlement agreement does not constitute an admission or finding of fault or wrongdoing. The company explained that settling was made to avoid the uncertainties and expenses associated with prolonged litigation.