Under Armour's board of directors on Monday agreed to create a new class of stock without voting rights, issuing up to 400 million shares in a two-for-one stock split that is designed to preserve CEO Kevin Plank's power over the global sports apparel brand.
Plank also agreed to a five-year non-compete agreement, which is contingent on moving forward with the stock.
The Baltimore-based firm currently operates under a dual stock structure, with Class B common stock having 10 times the voting rights of Class A stock. Plank currently owns more than 35 million shares — the vast majority in Class B common stock — giving him 16.6 percent of the firm's outstanding common shares and 66.5 percent of the voting power.
Under the terms of the split each holder of a share of either class would get an additional Class C share, which would have no voting rights. Creation of the new class C stock is designed to postpone the day when Plank's ownership falls below 15 percent, triggering the automatic dissolution of the dual stock structure, according to Under Armour's SEC filing.
In the SEC documents, Under Armour said it expects Plank's ownership to be diluted by regular employee equity-based compensation, possible stock-based acquisitions and Plank's sale of his own shares — his primary form of compensation — as he moves to diversify his investments in coming years.
In 2014 and 2015, Plank sold shares worth more than $190 million, in addition to more than $21 million for his charitable foundation.
The stock split is expected to take effect after a special meeting of stockholders on August 26.
Stockholders will be considering amendments to the company charter, including changes to how the two classes of currently existing stock are treated in events such as mergers, acquisitions or Plank's departure from the company. As part of the non-compete agreement, Plank has pledged to support the amendments, designed to put outside investors on more equal footing.