Investors Could Find A Chink in Under Armour
Not since Cal Ripken Jr. has Maryland produced as rich a sports hero as Kevin Plank.
Though he never played a professional game, the former University of Maryland football player last week became a $13 million bonus baby when the athletic underwear company he founded sold stock to the public.
Plank sold a million shares, a fraction of his holdings, in the initial public offering of Under Armour Inc., whose high-tech T-shirts and athletic supporters are worn by hundreds of professional athletes and thousands of wannabes.
Under Armour's IPO was Wall Street's most successful offering by an American company in five years, the first to virtually double on its opening day since a now-forgotten, or at least forgettable, California maker of computer chips called TransMeta Corp. back in November 2000.
Stock in Baltimore-based Under Armour was originally intended to be sold for $7.50 a share but was marked up to $13 a share at the last minute because demand was so great. When trading began Nov. 18, the stock jumped to $31, then settled back to close at $25.30, up 95 percent for the day.
What would have been a very good day for Plank turned into an incredible win. He went into the IPO process hoping to take out $7.5 million in cash and retain holdings worth about $112 million. When the dust settled, Plank had $13 million in his pocket and a stake worth $360 million.
Under Armour has a big following among Maryland investors, and those who got in on the IPO also made out like gangbusters -- a $1,300 purchase of 100 shares in the IPO generated a one-day profit of $1,230.
If, that is, investors were smart enough to sell their stock in the first-day frenzy.
And they'll still do well if they are smart enough to sell it soon, before reality catches up with the Under Armour myth.
In the first week of trading, Under Armour shares already have fallen more than 9 percent from their first-day close, ending Friday at $23.68 per share.
That is a hint that Under Armour shares may perform like an over-trained athlete who peaks too soon and then slowly fades into ordinariness. Executives at Under Armour said government regulations, as they interpret them, prevent them from commenting on the offering.
Already a stock picker who recommended buying into Under Armour is urging investors to "protect your profits." In other words, take the money and run.