The value of Auburn University‘s nine-year deal with Under Armour has fallen by more than 11 percent, due to a unique part of the contract in which the school chose to accept equity in the now-struggling apparel brand.
Back in 2015, Auburn and Under Armour re-upped their partnership through 2025, a deal worth $78.2 million in total value, according to the contract. As part of the agreement, the school agreed to accept $10 million of stock, paid out over the life of the contract.
It hasn’t worked out. The contract was signed in Sept. 2015, less than a week after Under Armour hit an all-time high of $54.70. The company has struggled since, undergoing a multi-year restructuring that included the elimination of 40% of its product line. With shares currently trading around $9, that $10 million stock grant is now worth just $1.77 million, according to Sportico‘s calculations.
The school was essentially betting that Under Armour’s stock would rise over the course of the deal, increasing the value of the shares. While it hasn’t worked out that way, there’s still time. Auburn won’t recognize that loss until it sells the stocks, and a Tigers spokesman confirmed that the school still owns all the equity.
At the time, Auburn likely jumped at the idea of owning stock in a company whose shares had risen nearly 800% over the previous five years and which media outlets praised as outsmarting Nike at its own game. For Under Armour, the deal also likely looked enticing, because if shares went up in value, they’d probably get a larger tax deduction when they delivered the shares to Auburn each year.
It’s rare for equity to be used as compensation in athletic contracts, primarily because public, non-profit institutions often avoid deals like that. Under Armour discussed stock options with a number of different schools around the time of the Auburn deal, according to someone familiar with the talks, but most couldn’t clear deals in which the school accepted equity. Notre Dame was the only other university to take stock, part of the school’s 10-year deal with Under Armour back in 2014. That contract isn’t public and the school declined to comment on the details.
As part of Auburn’s apparel contract, the school agreed to accept $10 million of Under Armour stock as of the price on October 1, 2015, a number that came out to 101,174 shares after adjusting for a 2016 stock split. That stock is awarded in even increments over the course of the deal, so nine installments of 11,241 shares every July 1.
As Under Armour stock price has fallen, so too has the value of those installments. The shares that the school has already received are now worth $786,000, and the outstanding shares are currently worth $982,000. That’s a total current value of $1.77 million.
Auburn’s Under Armour deal came in the middle of a string of pricey contracts that the company signed with top-tier athletic departments around the country. From 2014–16, the company signed 9+ year deals with at least 8 FBS schools, including Maryland, Notre Dame, Auburn, Cal and UCLA. Those last two have been in the news recently because Under Armour is trying to get out of those contracts (both schools say they’ll fight the company in court if needed).