Under Armour shareholders on Wednesday approved an unusual two-for-one stock split that will create a new class of stock without voting rights and give owners of each existing share of common stock one new share of the new class.
The plan, which would preserve CEO Kevin Plank's personal control over the Baltimore-based sports apparel maker even as he sells off some shares, drew criticism from corporate governance experts when it was announced in June and sparked a shareholder lawsuit.
The lawsuit filed in Baltimore Circuit Court alleges that the company's board breached its fiduciary duty to shareholders and seeks to block the split. The company earlier this month agreed to delay the split until the lawsuit is resolved.
"Our board feels strongly that this is in the best interest of shareholders," said John Stanton, Under Armour's senior vice president and general counsel, on Wednesday during a special meeting in which the plan was put to a shareholder vote.
Most stockholders had voted by proxy, though many at the meeting cast paper ballots. There was little doubt that the new stock structure would be approved, given Plank's majority voting control. The company did not release the outcome of the vote, pending a filing with the U.S. Securities and Exchange Commission.
The company has operated with a dual tier stock structure in which the CEO owns most of the Class B shares, which have 10 times the voting rights of Class A shares. That structure would end, however, when Plank's ownership dips below 15 percent and all his Class B shares would convert to Class A shares.
During Wednesday's meeting, Plank outlined the company's reasons for creating the new class of stock, including maintaining a "founder-led approach" to corporate governance that has resulted in soaring sales, profits and stock value for a decade and creating a currency for stock-based acquisitions and employee compensation.
Under Armour shares surged 4.3 percent to close at $90.76 each amid Wednesday's broader market rally.
"All our shareholders, including me, have benefited over the years," Plank said. "We have a lot more to do at Under Armour, and I'll be here every step of the way."
Many shareholders in attendance offered support for Plank and his vision for the rapidly growing company. Under Armour, which reached $3 billion in sales last year, aspires to grow into a $10 billion global brand and has been courting consumers aggressively in Asia and South America, while pursuing a bigger share of basketball, golf and the women's apparel market through affiliations with star athletes Stephen Curry, Jordan Spieth and Misty Copeland. Curry is the star point for the NBA champion Golden State Warriors; Spieth won two of golf's majors this year and is the world No. 1 golfer; and Copeland is a principal ballerina for the American Ballet Theatre.
Christopher J. Shinkman, an Under Armour investor since the company went public, traveled to the company's Locust Point headquarters from Bethesda with his son-in-law and two Under Armour-clad grandchildren, ages 10 and 6, for whom he has purchased stock, to support the stock split plan.
"I have absolute confidence in Kevin Plank," Shinkman said after the meeting. "I think he's in it for the long run, as we all are. He's shown he can get it done."
As part of the stock split, Plank agreed to support governance changes, including, for the first time, signing a non-compete agreement that would last five years if he leaves the company. He also agreed to a cap on the number of shares he can sell in any year and that Class B shares would convert to Class A shares if he leaves the company.
But he's not going anywhere, Plank told shareholders. Plank responded to one shareholder who asked if he had plans to leave the company.
"Why would you ask that?" Plank said. "What else would I do?... I love this city. I love this country. I love this company and I love this team. This is what I want to do."