Under Armour, Inc. and several top executives have been named in a proposed class action lawsuit in which an investor claims stockholders lost money once news of a federal investigation into the company’s sales reporting practices was made public.
According to the lawsuit, Under Armour touted its continually positive financial outlook in quarterly and annual financial reports beginning in the second quarter of 2016. Absent from the company’s filings with the U.S. Securities and Exchange Commission (SEC) was any mention that Under Armour had been shifting sales from quarter to quarter in order to “appear healthier” and keep up with its annual 20-percent net growth, the complaint alleges.
Unbeknownst to investors, the lawsuit says, the SEC and the U.S. Department of Justice had opened an investigation into Under Armour’s apparent sales shifting practices in July 2017. Despite cooperating with the investigation, the defendants concealed the existence of the probe from Under Armour stockholders until early this month.
According to the complaint, the truth came to light on November 3, 2019, when The Wall Street Journal reported that the government was investigating Under Armour’s reporting practices, which the company confirmed that same day. Upon this news, the price of Under Armour Class C shares fell by 18.35 percent, while Class A share prices plummeted 18.92 percent, the suit says.
The plaintiff claims he and proposed class members—those who purchased or otherwise acquired Under Armour securities between August 3, 2016 and November 1, 2019—have suffered “significant losses and damages” as a result of the defendants’ allegedly false and misleading statements.