Under Armour (UAA +0.00%)(UA +0.08%) is officially trading under its new ticker symbols. UAA represents the voting shares that formerly went by UA, while the non-voting shares that were formerly UA-C will transition to the old UA symbol. The move looks like an attempt to correct an unnecessarily large discrepancy in the two share classes' stock price.
A full transcript follows the video.
This podcast was recorded on Dec. 6, 2016.
Vincent Shen: I want to talk a little bit about dual-share class structures. After seeing the news last week that Under Armour would be changing up its ticker symbols, and after covering some of the oddities that have come about as a result of their three share classes, we can talk more about the ultimate implications for investors and look at some of the more interesting developments in the sports-apparel industry that would seem to buck the trend of what a lot of people associate with retail. Seth, why don't you kick us off? Can you give us a quick rundown on what the changes were that they announced last week? And what it generally means?
Seth McNew: Sure. Last week, Under Armour announced that they are again changing their ticker symbols. This is the second change this year. The idea is that their shares right now are UA and UA-C. Those are the two publicly traded ones. The UA shares will turn into UAA, and the UA-C shares will turn back into the plain UA.
Shen: What is the main difference? I know that, ultimately, it comes down to the voting rights. But what is otherwise the main incentive for this structure, where you have these multiple different classes?
McNew: Right. It just comes down to voting shares. You have your voting shares, which right now are the UA, will be the UAA. Then the non-voting shares, which is the UA-C, and will be just UA. Then you have another class of shares, UA-B, which is owned by Kevin Plank, and those are the main voting shares. Lots of companies, like Google, have these kinds of different classifications for voting and non-voting shares. What's really interesting is, while there's usually a bit of a price disparity between the two, there's a very big disparity with Under Armour. As of today, it's nearly 20% between the voting and non-voting shares.
Shen: Yeah, I think that's what most people have assigned the most significance to this news. It seems like Under Armour is trying to shift and address this spread that has grown quite consistently. I should note that previously, it was the UA and the UA-B. Those B-class shares, as you mentioned, Plank owns all of those. I think there's about 35 million or so of them. Due to the 10 votes per share that those get, versus the one vote on A shares, he has about a 65% voting interest. So overall, he has control of the company. It's not, frankly, uncommon among these founder-led companies. It's their vision. They started it.
I think, a lot of investors, if you're buying into Under Armour, you very much understand the fact that you're buying into Plank's vision, and that he has been the driving force behind this company with everything that has done so well in terms of its growth, its expansion, but also any hiccups here and there. But overall, I think people are quite happy with how the company has performed, the returns the shares have had. We can get to some of the weaker trading that's been seen in the past year.
But there was essentially a one-for-one share dividend issued. For every Class A or Class B share you held, you got a Class C share back in April. That 20% disparity has been pretty consistent now. It feels very odd, when the economic interests of these shares is exactly the same. It really comes down to those voting rights. And the thing is, for individual investors like our listeners and ourselves, we are not going to be accumulating enough shares to have a major voting interest anyway.
If you're an institutional investor, it certainly becomes much more valuable. You can have more input with management, maybe get a place on the board. But for ourselves, there was a discussion about this on an episode of MarketFoolery last week as well, and they basically break it down to the fact that you really should just be getting into those Class C shares, enjoying that 20% discount. If you believe in this company and its long-term vision, which we'll talk about more, that seems like the right way to go. Is it not? Doesn't that just seem like a huge opportunity for someone who's trying to buy in and get a, essentially, 20% discount?
McNew: Right. With most companies, there should be a disparity. It's valuable for a large investor to be able to have some say in the company and where it's going with your voting. But with Under Armour, it's just a moot point. Kevin Plank, like you said, owns 65% of the votes. So there's nothing that any investor -- whether you have shares that are voting or non-voting -- are going to be able to do for this. So at least for the foreseeable future, until that changes, that he doesn't have total control, these non-voting shares definitely look to be like a great discount to what looks like a great company.
