In one of the largest securities class action recoveries in the history of the United States, Under Armour has agreed to pay $434 million to cease investor claims that it inflated stock prices by hiding declining demand for its products.

The settlement, if approved by the United States District Court for the District of Maryland, comes just weeks before a 12-day trial was set to kick off on July 15.

“This is an important win for investors and a strong message to the directors and officers of public companies,” says Mark Solomon, partner at Robbins Geller Rudman & Dowd LLP and counsel to the lead plaintiff.

  • In the promotional products industry, Under Armour’s products are carried by alphabroder – the No. 2 supplier in the 2024 PPAI 100.

Terms Of The Deal

Filed in 2017, the lawsuit alleges that Under Armour and founder Kevin Plank – whose return as CEO in March caused shares to immediately drop 12% – violated U.S. securities law by not only making false and misleading statements, but also failing to disclose adverse information about the publicly traded athletic apparel company’s business and operations to investors.

Allegedly, investors had been assured that Under Armour’s 26-consecutive quarter 20% year-over-year revenue growth streak was “safely intact” when demand for the company’s products was in decline. The suit claims that the company’s financial results were manipulated to mask this decline by “pulling sales forward from future quarters” and other shady sales practices.

In a filing with the U.S. Securities and Exchange Commission (SEC) on June 21, Under Armour said that the proposed settlement “is not an admission of fault or wrongdoing by the company or Mr. Plank.”

  • In the SEC filing, the company said it has accrued more than $100 million in costs battling the litigation as of late March and now expects to spend $434 million on the case by the first quarter of fiscal year 2025.

Under the proposed deal, Under Armour will pay a class of all persons and entities who purchased or acquired stock between September 2015 and November 2019, according to the filing. The company has also agreed to “continue to separate the roles of chair and chief executive officer” for at least three years.

“We firmly believe that our sales practices, accounting practices and disclosures were appropriate, and deny any wrongdoing in this case,” says Mehri Shadman, chief legal officer and corporate secretary at Under Armour. “Today’s announcement allows us to move past this more than 7-year-old matter so we can avoid the ongoing distraction of litigation and provide certainty to the business at a time when we’re executing on important strategic priorities.”