Adidas (ADDYY) executive, Jim Gatto, has been arrested on federal fraud and corruption charges; accused of conspiring with HS coaches to drive players to sign with a school sponsored by the brand. Gatto allegedly made and concealed payments to HS athletes and/or their families. The federal indictment goes on to allege payments were made to college coaches to influence student-athletes to sign endorsement deals with the company once they turned pro. Adidas has since put out a statement saying, “We’re unaware of any misconduct and will fully cooperate with authorities to understand more.”
Howie Long-Short: ADDYY shares have taken a hit since the news broke, finishing down 2.5% on Tuesday. The good news for shareholders though is that these charges are unlikely to hurt the company long-term. Their sneaker and apparel rights deals are all long-term contracts and there isn’t another P5 program set to hit the open market anytime soon.
Fan Marino: The schools wrapped up in this; Arizona, Louisville, Auburn and Oklahoma State are going to get hit hard with sanctions. Arizona and Louisville have the most to lose; heading into the 2017-2018 season with Top 5 teams. The threat of program crippling penalties now hangs over both teams, as does the potential of self-imposing a tournament ban in a year where they have Final 4 aspirations. As an Arizona fanatic, I prefer the school let the NCAA do an investigation (which will take months), make a run at its first Final 4 since 2001 and worry about vacating wins later.