Yesterday Shelly Banjo of Bloomberg disclosed that the name of Under Armour’s Class C stock would be changing. I’ve been spending time trying to figure out what that means exactly and it is what it is, a name change. My interpretation of why this change is significant is because Class A are voting shares and Class C are not voting shares, but they trade at very different prices which is an opportunity for UA. According to this Motley Fool article, short term investors should look at UA which will now be called UAA, and long term investors should look at UA-C which will now be called UA. Confusing? I agree.
What exactly is the logic in doing this? Why now and what does it matter? The way it appears to me is that Under Armour is looking at utilizing the Class C as an opportunity to fund investment and growth. The Class A stock trades almost 25% higher than the Class C. If UA can inspire trading at the Class C level they don’t lose any voting rights, but they can move the Class C stock to a higher trading total. Since UAA is traded more often boosting the Class C is a way to get more cash flowing into the company and creates the opportunity for a faster bounce back from the 20%+ drop in Class A.
Here is a short explanation of the change: http://finance.yahoo.com/news/under-armour-announces-change-class-140000678.html
Here is a more detailed discussion of liquidity by Miriam Gottfried: http://www.wsj.com/articles/a-double-digit-return-is-hiding-in-plain-sight-at-under-armour-1480273380