It's been a long journey, but the stock split Under Armour (UAA -1.04%) announced last June will finally be completed on April 7. The culprit behind the delay? A class action lawsuit seeking greater protections for outside investors.

In this episode of the Industry Focus: Consumer Goods podcast, Sean O'Reilly and Vincent Shen explain what it was about the stock split's structure that alarmed shareholders into filing the suit shortly after the plan was announced, how the proceedings have played out, and what it all means for investors and Under Armour going forward now that a settlement has been reached.

A full transcript follows the video.

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This podcast was recorded on March 22, 2016. 

Sean O'Reilly: I don't want to call them shenanigans, but what's going on with Under Armour and this here stock split?

Vincent Shen: Sure. This news has been going through development, so to speak, for the past six months or so. So keep in mind that Under Armour originally announced plans for a stock split, it was last June. The delay happened due to a class action lawsuit that was filed by some shareholders, due to the way that they had structured the split. To give you more of that background, currently there exists two classes of shares, Class A and Class B. There's about 183 million shares outstanding for Class A, and about 34.45 million of the Class B.

What makes them different? Class A shares, you get one vote per share, Class B you get 10 votes per share. The Class B shares, not surprisingly, are all owned by CEO and founder Kevin Plank and his family. A big part of that, in the way it is set up that way, is because Plank wants to maintain control of the company he started, and it is understandable. This is not uncommon among companies where you had this one guy really leading the vision, and who has undoubtedly taken this company to a level of success that is truly incredible.

The company has gone through previous stock splits, so I think it was, let me find the dates here, in July 2012 and April 2014, they actually did a traditional split where for every share, Class A share, Class B share you had, you were getting one additional. Standard, two for one stock split.

This one's unique in that, for every Class A and B share you own, you're getting a new class, Class C shares. One share of Class C, and these Class C shares have no voting rights. The idea behind this, and the reason why it was controversial, and why there was a class action suit filed, is just because it kind of solidifies control that Plank has, in terms of those voting rights. It allows him to sell some of his holdings without diluting them.

O'Reilly: I'm kind of surprised he's that paranoid about losing control. To my knowledge, there's never been an assault on his leadership. The company's doing extremely well, so...

Shen: Just to give you an idea, based on those numbers right now, those voting rights were a core issue, and the thing is he controls about two-thirds, I think it's about 66% of the voting rights due to his Class B shares, and that gives him the power to elect the Board of Directors, and a lot of other... like the governance issues. That's obviously important to him. As I mentioned, Plank can sell some of his holdings now, through those Class C shares that he receives, and not worry about losing some of that control.

O'Reilly: Voting rights, Yeah.

Shen: The class action suit was filed, and they've gone through some iterations, and basically come to this agreement to allow the split to still take place with key terms...

O'Reilly: So he won. I mean, bottom line.

Shen: Yes, but there were some stipulations that came out. For example, there's a special dividend that's going to Class C shareholders, because the fact is, you have your Class A shares trading under the ticker symbol UA. These Class C shares are going to trade separately under UA.C. It's expected that, because they don't have voting rights, that some of that value ...

O'Reilly: Little bit of a discount. Yeah.

Shen: There's going to be a discount, and so that is a, going to be a one-time special dividend to Class C shareholders in the amount of $59 million, to compensate for that initial discount. There's also going to be, there's basically a strengthening of some of the non-compete clause, with the CEO, that he has to devote enough time to his role as a CEO, and this is on top of the fact that if he ever left the company, for example, he can't join any business venture ...

O'Reilly: He can't go work at Nike.

Shen: That wouldn't be for about five years.

O'Reilly: OK.

Shen: Then, also, if there's any major transactions that may involve the issuance of Class C shares as potential compensation for an M&A deal for example, the Board of Directors has to go through a special review to see how that will impact Class A shareholders, and also the company overall. Basically, it's like a watchdog system, to make sure that there's nothing with the issuance of these Class C shares, these other shareholders besides Plank aren't losing out in some way.