Key insights
- Under Armour settled a shareholder lawsuit for $434 million related to alleged misleading accounting practices used to maintain a 20%+ revenue growth streak. The company allegedly pulled forward orders to meet targets. While management denied wrongdoing, the stock price and revenue growth have not recovered to pre-2017 levels. This highlights the risk of overly optimistic guidance and potential legal ramifications.
Found this interesting breakdown of the Under Armour securities case and thought it was worth sharing for anyone following the story or who held $UAA stock.
The piece covers how Under Armour, after achieving an impressive streak of 26 consecutive quarters of 20%+ revenue growth, began struggling to meet its own promises by late 2016. What followed was a shareholder lawsuit and an SEC investigation that revealed the company had allegedly used questionable accounting practices, including pulling forward orders from future quarters to keep its growth streak alive.
The article also looks at the longer-term impact: a stock that once traded above $50 now sits around $8.50, and revenue growth has never recovered to pre-2017 levels.
Under Armour's management denied any wrongdoing. So, at what point does "optimistic guidance" cross the line into misleading investors?
Full read here: https://medium.com/@d.rodriguez_80563/the-price-of-overpromising-under-armours-legal-battle-626a9bc93740