Under Armour to pay $434 million to settle lawsuit over sales disclosures

4 weeks ago 56

Updated

Jun 22, 2024, 09:15 AM

Published

Jun 22, 2024, 09:15 AM

BALTIMORE - Under Armour on June 21 said it has agreed to pay $434 million (S$588 million) to settle a 2017 class action lawsuit accusing the sports apparel maker of defrauding shareholders about its revenue growth in order to meet Wall Street forecasts.

The proposed settlement, subject to court approval, averts a scheduled July 15 trial in Baltimore federal court.

The shareholder lawsuit accused the apparel maker and CEO Kevin Plank of intentionally misleading them about the company’s financial health.

In 2021, the Baltimore-based company had agreed to pay $9 million to settle Securities and Exchange Commission (SEC) charges that it misled investors about its revenue growth.

The SEC in its investigation found that Under Armour failed to disclose to investors that it employed a sales tactic to accelerate or “pull forward” a total of $408 million in existing orders in the second half of 2015.

Mr Mark Solomon, lead counsel for the shareholders and a partner at litigation firm Robbins Geller Rudman and Dowd, called the proposed settlement an “important win” that underscored the key role of pension funds in holding companies accountable.

Under Armour said it intends to pay the settlement amount of $434 million through cash on hand as well as by drawing on its $1.1 billion revolving credit facility.

The company added in a regulatory filing it had agreed to also continue to separate the roles of the chair and the chief executive officer for a period of at least three years.

Under Armour said it has consistently denied the accusations and entered into this agreement in principle, which is not an admission or finding of fault or wrongdoing.

The company expects its total accrual in legal proceeding contingencies related to the lawsuit to reach $434 million during the first qu...

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