Sean O’Reilly: What do you think he's thinking? Because a lot of other big business minds
that owned large percentages of the corporations they founded, cough cough, Bill Gates ... they,
he only owned, I think at its peak, he owned 28% -- don't quote me folks -- of Microsoft.
Vincent Shen: In terms of Plank's actual ownership, it's around 15-16%, but it's the voting rights.
He has very concentrated.
O’Reilly: Inordinately large control. It's just, Bill Gates has been selling his stake
in Microsoft. He stepped down from a full time role, in I think 2008 or something, but
he'd been selling millions of shares every quarter for ten years before that. He didn't
seem to worry about this stuff.
Shen: There's even stipulations here, in terms of Plank's selling of his holdings. There's
basically amounts, he set thresholds, where, for example, if he were to sell about 2.5
million Class A or C shares in a single year, then all his Class B shares convert automatically.
O’Reilly: Oh, wow. He's trapped.
Shen: It kind of controls how much he can sell per year, and that keeps him tied, you know?
O’Reilly: Do you think, to the heart of my question, do you think he's being OCD about
having voting control? Does he not trust ... you know what I mean?
Shen: I think on the one hand, a lot of the controversy came about from the fact that
the company announced it and basically characterized it as a straight two for one stock split,
like it's done previously, but that's obviously not the case.
These Class C shares have less value without those voting rights. That led to the lawsuit,
and the settlement they've come to, or this agreement that they've come to, but I can
understand ... I haven't started a company like this, and on the one hand, if you're
a shareholder and you're looking at the situation, the split ultimately doesn't really change
your thesis on the stock.
O’Reilly: Yeah, so moving on, what does this mean if I'm a shareholder right now?
Shen: Eventually, the Class C shareholders, they should be cognizant of the fact that
the company has made its intentions clear, that with stock-based compensation, equity
issues, and M&A transactions or in partnership deals, that's going to come from the Class C.
O’Reilly: Okay.
Shen: That potential for dilution is going to be there. Otherwise, if you're a long-term
Under Armour investor, you already generally agree with how Plank's been running the business.
Keep in mind, this is a company where its revenue, its top-line growth has been unbelievable.
It quadrupled from about one billion dollars to four billion dollars over the past five
years. Unbelievable growth. The management, the brain power, overall, if you're buying
into a company that's trading at 64 times its expected 2016 earnings, and that's after
the stock has fallen 20% from its highs of last year, you basically buy into the vision
that Plank's had. This steady expansion, he's guided the company with a pretty steady hand.
The split does little to change that story, whether or not you agree with the way that
he's going about the stock split in order to maintain his control over the voting rights,
and wanting that ability to sell some of his shares without eroding those rights, that
is on you, but in terms of the actual investing thesis, I don't think it changes the story
at all. Otherwise, it just kind of closes out the chapter.
For the details here, the Class C stock, I think started trading this week, and the official
shares will be issued on April 7, to shareholders on record as of March 28, and, like I mentioned,
they'll trade under UA.C.