UA_Statement of the Case

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Under Armour IPO 1 Copyright Donna M. Hitscherich 2002-2023. All rights reserved. Prepared for educational use only. Statement of the Case: Under Armour (NASDAQ: UARM) was founded in 1995 by then 33-year old CEO Kevin Plank. On November 17, 2005, UARM went public priced at $13.00 (“IPO”). 1 UARM’s initial price talk was $7.50-$9.50 and the filing range was subsequently increased to $10.00-$12.00. 2 The shares opened for trading at $31.00 and closed at $25.01. 3 From 2000 to the date of its IPO, UARM was the first U.S.-based initial public offering to double in its trading debut. 4 At the time of the IPO, UARM sold compression products and other offerings through 8,000 retail stores and reported net income of $13.8 million and revenue of $194 million in the first nine months of 2005, up from net income of $12.7 million and revenue of $136 million in the year-earlier period. 5 Additional information on UARM can be found in the companion case study: Under Armour: Protect this IPO or Sale to a Strategic Bidder . Learning Objective: At the conclusion of this Case Study, the learner will be able to: 1. Define an initial public offering (“IPO”) and explain the characteristics of a firm that would make the firm an attractive IPO candidate. 2. Describe the process by which a firm is taken public. 3. Contrast the valuation methodologies used in an M&A transaction with those in an IPO and explain how the “final” sales price is reached in each. QUALITATIVE DIRECTIVES/QUESTIONS : In answering each of the Qualitative Directives/Questions below, cite the source of the data used to answer the Directive/Question. For example, if the Question were: What is the date of the UARM S-1?, the answer would be: November 17, 2005. Source: UARM S-1 at page 1. 1 Market Watch, Under Armour’s IPO Doubles, Nov. 18, 2005 available at https://www.marketwatch.com/story/under-armour-up-100-in-biggest-us-open-since-2000 (last accessed 11.7.23). 2 Id. 3 Id. 4 Id. 5 Id.

Under Armour IPO 2 Copyright Donna M. Hitscherich 2002-2023. All rights reserved. Prepared for educational use only. 1. Define primary and secondary shares and state the number of primary and secondary shares offered in the UARM IPO and with respect to the secondary shares, identify the principal selling stockholders. 2. Define dual class stock and describe the main features of the dual class shares in the UARM IPO, including conversion and voting rights. 3. Identify the four main categories of Risk Factors described in the UARM S-1. For each category identified, state what you believe is the most significant risk in that category and why. 4. Define “Green Shoe” and describe the amount and intended effect of the Green Shoe in the UARM IPO. 5. State where UARM was incorporated and describe the provisions of its charter, bylaws and Maryland statute that could be deemed to have an “anti-takeover” effect. 6. Identify the underwriters and the individual share commitments made by each underwriter. State the obligation of the underwriters pursuant to the UA as described in the UARM S-1. 7. Describe what a lock-up is in the context of an IPO and the terms of the lock-up in the UARM IPO as described in the S-1. 8. Write five sales talking points for the UARM IPO. QUANTITATIVE DIRECTIVES/QUESTIONS : In responding to each of the Quantitative Directives/Questions below: (a) show your numerical calculations and (b) cite the source of the data used to respond to the Directive/Question. For example, if the Directive were: Identify the number of shares UARM is selling in the offering, the answer is 9,500,000. Source: UARM S-1 at page 1. 1. Explain the following statement: IPOs cause immediate dilution to those stockholders that purchase in the offering and provide a numerical illustration of the dilution suffered by a purchaser of shares in the UARM IPO. 2. Identify what you believe to be the best comparables to price the UARM IPO. Based on these comparables, state the per share offering price to the public you would have recommended for the UARM IPO. 3. Based on the offering price in the UARM IPO, calculate the implied market cap of UARM post IPO.

Under Armour IPO 3 Copyright Donna M. Hitscherich 2002-2023. All rights reserved. Prepared for educational use only. 4. Assume the UARM IPO priced at $26 per share. Calculate the impact of a $26 IPO price vs a $13 IPO price on Kevin Plank. 5. Which transaction do you believe Kevin Plank would favor-an IPO or an M&A transaction? In answering this question describe the: (a) tax implications; (b) continuity of control implications; and (c) likely attainable valuation with respect to each of an IPO and M&A transaction. 6. Were UA to pursue an M&A transaction: (a) evaluate the likely valuation achieved and (b) state how you believe the process should be conducted (i.e., auction vs privately negotiated sale). CRITICAL THINKING/SKILLS QUESTIONS : 1. Assume UARM wished to raise $112.5 million in an IPO. Based on potential offering prices of $10.00, $13.00, $16.00 and $19.00 per share, create a framework for the Board of Directors to evaluate the various potential offering prices on (a) Kevin Plank’s pro forma ownership of the common stock and (b) implied post-IPO valuation of UARM. 2. Assume NIKE were to make a stock bid for UARM. Explain how would you develop a framework for the Board of Directors to consider the impact of acceptance of a stock offer on Kevin Plank’s pro forma ownership in a combined UARM and NIKE?

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