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It was the kind of growth story Wall Street dreams about. For 26 straight quarters, Under Armour didn’t just grow; it exploded. Every single quarter, revenue was up at least 20%. Kevin Plank, the founder who famously started the company in his grandmother's basement, was the hero of the "athleisure" world. But then, the wheels fell off.
Suddenly, that legendary streak ended in early 2017. The stock tanked, dropping 25% in a single day. People started asking questions. How did they keep that 20% number so perfect for so long?
The answer turned out to be a legal nightmare that lasted seven years. It finally "ended"—if you can call a $434 million payout an end—in late 2024. If you’ve ever wondered how a company goes from being the next Nike to paying out one of the largest settlements in the history of the Fourth Circuit, you’ve gotta look at the under armour securities litigation.
The "Pull Forward" Magic Trick
The core of the whole lawsuit was something called "pulling forward" sales. Honestly, it's a pretty simple concept, but it's risky as hell. Imagine you’re a salesperson. You need to hit a goal by Friday, but you’re $5,000 short. You call a customer who was going to buy next Monday and convince them to buy today instead.
You hit your goal! Great, right?
The problem is, now you’re $5,000 behind for next week. You’ve basically stolen from your future self to look good today.
Under Armour did this on a massive scale. According to the SEC and the investor lawsuits, the company pulled forward about $408 million in orders over six consecutive quarters starting in 2015. They weren't just asking nicely; they were reportedly offering discounts and extended payment terms to get retailers to take products early.
Why it became a legal firestorm
The law doesn't necessarily say you can't ship things early. The issue is what you tell the people buying your stock.
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While Under Armour was internally scrambling to "pull forward" millions to hit their targets, they were telling the public that demand was "strong" and the 20% growth streak was "safely intact." Investors, including big pension funds like the North East Scotland Pension Fund, felt they were being lied to. They were buying stock based on a "growth" story that was being propped up by accounting maneuvers rather than actual consumer demand.
A $434 Million Reality Check
For a long time, it looked like Under Armour might actually win. The case was actually dismissed twice by a judge. It seemed dead.
Then, in 2019, The Wall Street Journal broke the news that the Department of Justice and the SEC were both sniffing around these exact sales practices. That changed everything. The case was revived, and suddenly, Under Armour was facing a trial that was supposed to start in July 2024.
Just weeks before that trial was set to begin in Baltimore, Under Armour blinked.
They agreed to pay $434 million. To put that in perspective, the SEC had only fined them $9 million back in 2021. The class-action lawyers managed to get a recovery almost 50 times larger than the government did. That’s huge. It’s actually one of the top 50 largest securities class-action settlements in U.S. history.
What else did they lose?
It wasn't just the cash. The settlement forced some pretty big changes in how the company is run:
- Separating the Power: For at least three years, the person who is the CEO cannot also be the Chairman of the Board.
- Performance Perks: Stock benefits for top executives like the CEO and CFO now have to be tied to actual performance conditions set by the board.
- Independence: The lead plaintiff—that Scottish pension fund—really pushed for these "governance reforms" to make sure one person (like Kevin Plank) didn't have total control over the narrative again.
Did They Actually Admit Fault?
Nope. Not even a little bit.
If you read the official statements from Under Armour’s legal team, they’re still sticking to their guns. Mehri Shadman, the Chief Legal Officer, basically said they firmly believe their accounting was appropriate and they deny any wrongdoing. They’re calling the $434 million a way to "move past" the distraction.
That’s a very expensive way to say "no comment."
From a business perspective, the company had to weigh the risk. A jury trial in Baltimore—their hometown—could have gone sideways fast. If a jury decided they’d committed actual fraud, the damages could have been way higher than $434 million. By settling, they capped their losses.
What This Means for You (The Investor)
If you bought Under Armour stock (UAA or UA) between September 16, 2015, and November 1, 2019, you were part of the "class."
The deadline to file a claim for a piece of that $434 million was November 12, 2024. If you missed it, you’re likely out of luck. Most of the money usually goes to the big institutional investors anyway, but retail investors who held through the crash were eligible too.
The stock itself has never really recovered to those 2015 highs. Back then, it was trading over $50. Now? It’s been hovering in the single digits or low teens for a while. The brand is trying to find its soul again, leaning back into "performance" gear and trying to ignore the "athleisure" trend that they missed so badly while they were busy pulling sales forward.
Actionable Insights for the Future
The under armour securities litigation is a classic case study in what happens when a "growth at all costs" culture meets the reality of a cooling market. Here is what you should take away from this saga:
- Watch the "Streaks": If a company has a "perfect" growth streak that seems too good to be true, it might be. Real business is messy. Straight lines on a revenue graph are often a red flag.
- Executive Turnover Matters: During the period in question, Under Armour went through CFOs like water. If the person in charge of the money leaves suddenly (like Chip Molloy did after only 13 months), start looking closer at the books.
- The SEC isn't the final word: Just because a company pays a small fine to the government doesn't mean the legal trouble is over. The private class-action system often has much sharper teeth, as evidenced by this $434 million settlement.
- Governance is more than a buzzword: The fact that shareholders demanded the separation of the CEO and Chairman roles shows that they blamed a lack of oversight for the whole mess. When one person holds all the keys, there's nobody to tell them "no" when they suggest pulling $100 million from next quarter.
Under Armour is still around, and they’re still making great workout shirts. But the shadow of this litigation will hang over their financial reputation for years. They learned the hard way that you can only "borrow" from the future for so long before the bill comes due.
Check your old brokerage statements if you haven't already. While the main claim deadline has passed, keeping an eye on the final distribution reports can give you a sense of how these massive settlements actually get paid out.