By T. Jayani, JadeTimes News
On Friday, Under Armour announced that it has agreed to a $434 million settlement to resolve a 2017 class action lawsuit. The lawsuit accused the sports apparel company of deceiving shareholders about its revenue growth to meet Wall Street forecasts. This proposed settlement, pending court approval, will prevent a trial scheduled for July 15 in Baltimore federal court.
Shareholders claimed that Under Armour and its CEO, Kevin Plank, deliberately misled them regarding the company's financial status. In 2021, Under Armour had already agreed to pay $9 million to settle charges from the Securities and Exchange Commission (SEC), which found that the company misled investors about its revenue growth.
The SEC's investigation revealed that Under Armour failed to inform investors about a sales tactic used to accelerate or “pull forward” $408 million in existing orders during the second half of 2015. Mark Solomon, lead counsel for the shareholders and a partner at the litigation firm Robbins Geller Rudman & Dowd, described the proposed settlement as an “important win,” highlighting the crucial role of pension funds in holding companies accountable.
Under Armour stated that it plans to fund the $434 million settlement using cash on hand and drawing from its $1.1 billion revolving credit facility. Additionally, in a regulatory filing, the company committed to maintaining separate roles for the chair and the CEO for at least three years.
While Under Armour has consistently denied the allegations, it entered into this settlement agreement, which does not constitute an admission or finding of fault or wrongdoing. The company expects its total 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.
