March 22, 2023


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Under Armour shares tumble after it reveals execs received ‘Wells notice’

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An Under Armour store front is seen on November 04, 2019 in Sunrise, Florida.

Joe Raedle | Getty Images

Under Armour shares tumbled Monday after the company disclosed it received notice of a possible enforcement action from the Securities and Exchange Commission related to the accounting treatment of sales it booked between the third quarter of 2015 and the fourth quarter of 2016. 

The retailer’s stock was down roughly 4{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} in premarket trading. 

On July 22, Under Armour in addition to two executives — Kevin Plank, its former CEO and current executive chairman, and David Bergman, its current CFO — received Wells notices from the SEC related to a previously disclosed probe by the agency, the company said in an 8-K filing. 

The SEC’s investigation was looking into the timing of Under Armour’s sales. A Wells notice doesn’t necessarily mean the company or the executives violated the law. However, it does indicate the agency is considering an enforcement action. 

“The SEC Staff has not alleged any revenue recognition or other violations of generally accepted accounting principles relating to that or any other period,” the company said in the filing. “The Wells Notices informed the Company and the Executives that the SEC Staff has made a preliminary determination to recommend that the SEC file an enforcement action against the Company and each of the Executives that would allege certain violations of the federal securities laws.” 

Under Armour said that it maintains its actions were “appropriate,” and it intends “to work toward a resolution of this matter” with the SEC. 

Last November, the company confirmed it was the subject of federal investigations by the Justice Department and SEC over its accounting practices. Under Armour began responding in July 2017 to requests for documents and information related to its accounting practices and related disclosures, a company spokesperson said at the time. 

Meantime, Under Armour has faced turmoil in its executive ranks. The company went through three CFOs in the period between 2016 and 2017, and Plank stepped down from his job at the start of the year, to be succeeded by then COO Patrik Frisk. 

Under Armour shares have fallen almost 50{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} this year, and the company has a market cap of $5 billion. 

It is set to report quarterly earnings on Friday before the bell. 

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