On May 3, 2021, the Securities Exchange Commission (“SEC”) announced charges against Under Armour Inc. (“Under Armour”) for “misleading investors as to the bases of its revenue growth and failing to disclose known uncertainties concerning its future revenue prospects.” Under Armour agreed to settle the case, paying a $9 million fine. The settlement stems from allegations that Under Armour violated Sections 17(a)(2) and (3) of the Securities Act of 1933, which do not require proof of scienter, as well as reporting provisions of the federal securities laws, by failing to tell investors that it pulled forward orders to meet its quarterly targets in order to appear healthier.

According to the release, the SEC alleges that Under Armour began “pulling forward” or prematurely booking revenue that should have been booked in a later period, about $408 million in orders over six consecutive quarters beginning in the third quarter of 2015. Many of the orders were those that customers had requested be shipped in future periods. Such a practice caused Under Armour to make misleading statements regarding its revenue growth due to various factors without disclosing material information about its pull-forward practices to investors. The order went on to find that Under Armour “failed to disclose that its increasing reliance on pull forwards raised significant uncertainty as to whether the company would meet its revenue guidance in future quarters.” The release went on to state, “[a]ccording to the order, using these undisclosed pull forwards, Under Armour was able to meet analysts’ revenue estimates.” In addition, the order also found that Under Armour was not meeting its North America internal sales projections.

As stated, the settlement between Under Armour and the SEC includes payment of a $9 million penalty. Under Armour did not admit or deny the findings in connection with the settlement.