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Report weighs in on Under Armour stock split

Under Armour plans to execute its two-for-one stock split for Thursday, giving each of its shareholders another share of a new non-voting stock for each one they own.

The unusual split, which creates a Class C common stock, is designed to preserve founder and CEO Kevin Plank's personal control over the Baltimore-based athletic apparel brand.

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The Class C stock, which will trade under the UA.C ticker symbol on the new York Stock Exchange, will be issued through a stock dividend to all existing holders of Under Armour's Class A and Class B common stock. Shares will be issued to stockholders of record as of March 28.

The company has operated with a dual-tier stock structure under which Plank owns most of the Class B shares, which have 10 times the voting rights of Class A shares. Under the new plan, that structure would end when Plank's ownership dips below 15 percent and all his Class B shares would convert to Class A shares.

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During a shareholders meeting last year, Plank argued for the new class of stock as a way to maintain a "founder-led approach" to corporate governance that has resulted in soaring sales, profits and stock value for a decade.

Plank currently owns nearly 16 percent of outstanding stock and controls 65.3 percent of the voting shares.

A Money Morning report out this week answers the question: "Should I buy UA after the Under Armour stock split?

From the report:

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"When a company splits its shares, the market cap before and after the split remains the same. In short, shareholders own more shares, but each is valued at a lower price per share. However, a lower-priced stock on a per-share basis often attracts a wider range of buyers. That can end up boosting the share price.

The April 7 split marks Under Armour's third stock split in as many years. And more Under Armour stock splits are likely."

You can find the report here.

lorraine.mirabella@baltsun.com

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