Ever since what was effectively a 2-for-1 stock split back in April 2016, there had been two publicly traded classes of Under Armour (ticker: UA, UAA) stock: Class A shares that traded under the ticker symbol "UA", and Class C shares, which traded under ticker symbol "UA.C."
Adding more confusion to the situation, the two tickers just changed again in early December. The two classes of Under Armour stock now trade under the ticker symbols UA and UAA.
So, what's the difference between UA and UAA?
The main distinction between UA and UAA shares comes down to voting rights. UA stock, formerly trading under the UA.C symbol, stands for Class C shares, with no voting rights. UAA stock, formerly trading under the symbol UA, stands for Class A shares, which confer one vote per share to the owner.
Another small difference between UA stock and UAA stock results from this discrepancy in voting power. Because Class A shares actually allow shareholders to vote on governance issues, UAA stock will typically trade at a premium to UA stock, which doesn't have voting rights.
At the end of the day though, even public shareholders of UAA stock will have no real power in determining the direction of the company.
That's because founder and CEO Kevin Plank owns tens of millions of Class B shares, which aren't traded publicly and confer a disproportionate number of votes per share to him.
More on that later. First, how did this strange dual-ticker issue come to be?
The Under Armour stock split of 2016, and subsequent ticker change. In April 2016, Under Armour shareholders received one share of Class C stock as a special dividend for every Under Armour share they owned, allowing Under Armour to cut its stock price in half, just as it would have in a 2-for-1 split, without giving shareholders any additional voting power.
Ticker-wise, shareholders all got one share of UA.C for each share of UA they owned, and the UA stock price fell by roughly 50 percent due to the effective doubling of the number of Under Armour shares on the market.
For tax purposes, the cost basis was re-allocated roughly evenly between the two shares, meaning shareholders couldn't sell UA for a 50 percent loss and take a tax write-off (nice thinking, though).
Of course, as mentioned, those UA shares -- the Class A share class -- turned to UAA shares in December.
Votes, shmotes. At last check, there were over 183 million UAA shares outstanding, giving the public 183 million votes. While that sounds like a lot, Kevin Plank owns over 34 million Class B shares, conferring more than 340 million votes.
That is why UAA shareholders -- and certainly UA investors -- have no real power to exert over the company.
"These shares represent a majority of votes and render the voting rights of the A shares moot," says Paul Bolster, a professor of finance at the D'Amore-McKim School of Business at Northeastern University in Boston.
Despite this, Class A shares have, ever since Class C shares were first issued in the Under Armour stock split, traded at a major premium to their nonvoting cousins. It hasn't been unusual for that markup to reach 20 percent.
"This seems like a very high premium to pay for a vote that has little to no value," Bolster says.
The rationale. Before you go ringing your broker or calling your congressman, it should be said that Kevin Plank is no corporate tyrant. He is hardly alone in his decision to consolidate voting power; Alphabet ( GOOG, GOOGL), Facebook ( FB) and even Berkshire Hathaway ( BRK/A, BRK/B) all have similar dual-share structures.
"The intended purpose of the dual-class shares is to separate the control from the ownership of the company," says K C Ma, professor of finance at Stetson University. "The dual-class share structure is an obvious defense for takeover bids, hostile or not, from inside or not."
That's great news if you're Plank or if you believe in his vision. But if you'd rather have some checks and balances in place, this isn't so great for corporate governance. Granted, Plank has proven an excellent steward of shareholder value over the years, but there's never a guarantee that will continue.
Why the UA to UAA ticker change? It's understandable why Plank would want to issue two share classes. One good question, however, is why the company decided to change its ticker symbol after the Class C shares were already issued.
After all, both Class A and Class C shares had already been trading publicly for months, under their old symbols UA and UA.C., respectively. But when they changed to UAA and UA, the company gave no stated reason for the change.
Some might say the ticker symbol change was purely cosmetic -- UA looks better than the clumsy UA.C.
A cynic, however, might say the ticker change was done to encourage more people to buy the UA non-voting shares. While Class A UA stock previously experienced far higher trading volume than the Class C UA.C did, as soon as the most recent change was made, Class A UAA trading volume was dwarfed by Class C UA trading volume. Much of that likely has to do with the fact that the ticker UA has been associated with Under Armour for years now, so its liquidity benefits from investor familiarity.
Still, that cynical view makes little sense in light of Plank's power to vote 65 percent of shares, so cosmetics could be the motivating factor. It's unclear, really, but as long as investors know the difference, the ticker itself doesn't much matter.
A company spokeswoman says the change was made because "the Class C stock is the main stock that we will use going forward and, therefore, we wanted to align our traditional ticker with the Class C shares."
When it comes to which share class new investors should buy, there are differing opinions. It's true that Class A shares carry one vote, but if this article does anything it hopefully hammered home the fact that those votes are essentially meaningless.
That leads Ma to reach this conclusion: "Under Armour is the same economic entity which generates the same cash flow for all Under Armour Class A, B and C shareholders. For investors buying in Under Armour for Kevin Plank's visions, it's not a bad deal to buy at a 20 percent discount."
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