Auburn has agreed to a new 10-year apparel contract with Nike, a deal that will follow its unique financial arrangement with Under Armour—which has decreased in value by $8.6 million because of its equity component.
Back in 2015, Auburn and Under Armour extended their partnership through 2025 in a nine-year deal worth $78.2 million in total value, according to the contract. As part of the arrangement, the school agreed to accept $10 million in Under Armour stock, paid out over the life of the contract—a bet that the apparel company would continue its rapid growth, therefore increasing the school’s compensation.
It hasn’t worked out. The contract was signed in Sept. 2015, less than a week after Under Armour (NYSE: UAA) hit an all-time high of $54.70. The company has struggled since, including a multiyear restructuring and a handful of leadership changes. With the stock currently trading around $6.80, that stock grant is now worth about $1.4 million, according to Sportico’s calculations.
Under Armour’s stock, of course, could rebound, and Auburn won’t recognize the losses until it sells. An Auburn representative didn’t immediately respond to a request for comment, but the school hadn’t sold any of its accrued equity as of July 2020.
In its Under Armour deal, Auburn agreed to accept $10 million worth of stock as of the price on Oct. 1, 2015, a number that came out to 206,016 shares after adjusting for a 2016 stock split, according to Sportico’s calculations. That stock is awarded in even increments over the course of the deal, with nine installments of 22,891 shares every July 1 from 2017 through 2025.
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 $1.09 million, and the outstanding shares are currently worth about $311,317. That’s a total current value of about $1.4 million.
It's an unfortunate financial result for the SEC school. At the time, Under Armour stock had risen nearly 800% over the previous five years, and the company was receiving praise for challenging incumbents Nike (NYSE: NKE) and Adidas. If you look at the company’s stock price over the past decade, the deal was signed at the apex of a rapid rise, just before a rapid fall. (For Under Armour, the deal also likely looked enticing, because if shares went up in value, the company would 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, nonprofit institutions often avoid such deals. Under Armour discussed stock options with a number of different schools, Sportico previously reported, but 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 previously declined to comment on the details. Notre Dame in 2023 extended that agreement for another 10 years.
The school’s Nike deal will begin in July 2025. Auburn athletics representatives didn’t immediately respond to questions about the financial specifics of the Nike contract.
Auburn spent $192 million on athletics in 2022-23, according to Sportico's college finance database. That's the 10th highest budget among public FBS schools, and fourth highest in the SEC.