Rumors of Under Armour Takeover

[caption id="attachment_10479" align="alignleft" width="199" caption="Under Armour is so Baltimore it painted Federal Hill"][/caption] An alleged London Times piece yesterday floated the rumor that Nike, the mega billion-dollar sportswear behemoth, has been mulling a takeover bid for Baltimore-based Under Armour. I got the feed from a colleague who pointed to someone pointing to a post on Seeking Alpha, the credulous blog catering to would-be investors in the sandbox. Says this post:

A quick search found a half dozen other takers, including



(which has the inevitable Cramer angle, so you know it's all ethical and stuff), and our own

Baltimore Business Journal



today. The

Business Journal

was judicious about sourcing:

I could not find the original

London Times

article straight-away—hence "alleged"--but let's posit that the article exists. Pace those silly Brits' penchant for rumor-mongering,


would such an article exist? Let's think this through a little. First: Nike doesn't have $660B in debt. That's a typo--probably meant "m," as in million. Secondly: One buys a brand like UA to ride it, unless it's a direct competitor, in which case one kills it. UA is a direct competitor to Nike, albeit a very small one. So far, the only brand name Nike boss Phil Knight bought that still stands as a consumer icon is Converse, which he keeps like a trophy

. Converse used to compete with Nike, now it's segmented into a sub-market. Third:  What does UA have except a savvy founder with a Nike-like marketing touch? The company has some patents, but it's hard to say they're enforceable. The wicking technology that made the company is essentially ubiquitous; since UA

it faces constant leakage/theft of innovation. (This is industry standard, of course--not a knock on UA). So will UA's



be game-changers? Doubtful. All of which suggests that Nike would buy UA—if it is indeed pondering such a purchase--only to kill a competitor. This would necessarily make UA CEO Kevin Plank and a few of his droogies a whole lot richer (plus anyone who bought the stock just before the news hit—

), but I don't see much benefit for Baltimore--or for athletic consumers generally. This line of reasoning assumes, of course, that Phil Knight


worried about Kevin Plank. But is there any sign of that? BBJ got no comments from both sides and I got less than that, so far. Basically that means there is nothing to lead one to believe there is a takeover in play instead of a hedge fund (or other large investor) gambit to goose stock prices in support of previously taken positions. And if we go back a week on Seeking Alpha we find

.  This is interesting for several reasons, beginning with the fact that the poster is someone named "Jefferson Starship." Here's

. He's anonymous, but on

someone signs their name Jeff Gaskill. Looks like he and his buddy are a couple of kids having fun. I tried to email Gaskill on his web site and the message bounced. No telling for sure, of course, whether Jeff Starship is really named Jeff Gaskill. Nevertheless, Mr. Starship's canny analysis appeared on the same day UA announced the

, in a realignment to optimize growth. The stock was around $67 that day, up already from the low $50s a month previous. The Starship analysis is perhaps too telling:

Anyway, as the BBJ notes, these takeover rumors have arisen before. One should expect they'll arise again. So here is what seems to be happening: Under Armour, which just recently passed the billion dollar-annual-revenue mark, is the perfect-sized company for hedge fund


professionals and other savvy investors to play games with. It's not so small and thinly-traded that the feds will immediately see the scam, as they routinely do with penny stock boiler room operations, but it's not yet so big that one needs to be John Paulson or someone like him to have an impact on the price. (Remember what

says about this kind of stock manipulation: "It's a fun game, and it's a lucra­tive game.") It's not likely anyone will know very soon who started the rumor, but if Phil Knight doesn't start throwing money around in the next month or so, it might be fun for some SEC investigators to roll the ticker back and see who's been making money on the stock's volatility.

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