Under Armour, Inc. (UA - Analyst Report), which has a dual class share structure, has approved the creation of Class C of common stock. These stocks will have all the rights that the company’s Class A stocks carry, except for voting rights.

Under Armour CEO and founder Kevin Plank, in a letter to shareholders, stated that this strategy will help the company to retain its corporate governance model. The creation of a new class of shares would prevent Plank’s stake from falling below 15%, a scenario in which the dual class structure will collapse and hence dilute his controlling stake as well as jeopardize the company’s governance.
 
Plank revealed that dual class structure was formed to allow him more control over the company’s affairs to drive long-term growth. However, dilution occurring due to regular employee equity-based compensation, stock-based acquisitions, equity financings, and/or any sale of stock by Plank himself could threaten the balance, potentially disrupting the current governance.

 As a result, the company’s board of directors approved the creation of the new class of shares that can be utilized as a new form of currency for corporate uses such as equity-based employee compensation and stock-based acquisitions. Plank owns all the Class B shares that have a higher voting power than Class A shares.

Plank justified the current corporate governance structure by highlighting the 2,401% gain as of Jun 12, 2015 that the stock has witnessed since its IPO in 2005. Moreover, both revenues and net income have grown at a CAGR of 30% between 2005 and 2014. Plank has also signed a five year non-compete agreement with the company. Further, there would a limit on the number of shares he would be allowed to sell in a year while maintaining the dual class structure. If he ever leaves the company, the dual class structure would cease to exist.  

Under Armour will issue the non-voting class C shares through a stock dividend to the existing shareholders of the company’s Class A and Class B shares, which will effectively be same as a two-for-one stock split. The new shares will trade under a new symbol at the NYSE. The symbol and date for the stock dividend has not yet been announced.

The company has convened a special meeting on Aug 26, 2015 to get the approval of shareholders for some amendments to Under Armour's charter that the board has recommended for approval pertaining to the creation of the Class C stock. Kevin Plank has already agreed to pledge his support to these changes.

Analysts point that this technique was earlier used by Google Inc (GOOG, GOOGL). to maintain the so-called “founder led approach”. However, Google was severely criticized when it tried to push for the creation of a new class of shares.

At present, Under Armour is a Zacks Rank #3 (Hold) stock. Better-ranked stocks in the same industry include G-III Apparel Group, Ltd. (GIII - Snapshot Report) and Columbia Sportswear Company (COLM - Snapshot Report). While G-III Apparel Group sports a Zacks Rank #1 (Strong Buy), Columbia Sportswear carries a Zacks Rank #2 (Buy).