Add a bit of commentary and a trade idea to Gary’s earlier post on the big up move in Under Armour (UAA) today post earnings. Under Armour is one of a host of companies with dual share classes of stock, but in this case with an even more intricate twist. The “regular” class trades under the UAA ticker, while a “separate” class of shares trade under the UA ticker. The difference is quite simple: UAA shares have voting rights and UA shares do not, and are most used to compensate employees for stock option exercise, among other things. But I would argue that the difference here is hardly worth much, since there is yet another share class known as a “super voting” class that is over 60% controlled by Kevin Plank, the founder and CEO of UnderArmour. The voting rights in this class dwarf the voting control of the UAA class, rendering them relatively useless. However the UA class trades at over a two point discount to the UAA class as people seem to ascribe way too much value to those voting rights. As of today this is a greater than 10% discount ($22.83 vs $20.70 as I type this note). Part of this discount can also be attributed to the fact that the UAA is extremely heavily shorted (at >10% of the float), although much lower than in the recent past, and it is readily available to borrow when I checked my account at Fidelity. This ends up being a trade that is somewhat directional in nature as UnderArmour is quite volatile. If UAA pulls back, this spread will narrow, and vice versa. Several times over the past year, I have sold short UAA and bot UA at a discount between $1.85 and $2.00, and in all cases unwound the trade around $1.35-$1.50. If you think today’s 20%+ pop in UnderArmour is a bit overdone, this arbitrage is a great way to play a possible pullback without really taking a stance on UnderArmour’s underlying valuation.