Help! possible UA vs UAA stock arbitrage

Finance
#1

UAA is the voting shares and UA is the non-voting class of shares of Under Armour. Other than that they are the same. Lately the 2 have been diverging (compare the 2 in the month view of your favorite chart). I have been racking my brain on how to monetize this anomaly. They will have to revert back to mean at some point. But I can’t think of a GREAT way to do this. The easy answer is short one and long the other, but I would like a more powerful way to do it. I think time degredation will take options out. Anyone else with ideas?

Also my thought is a big player has to buy voting shares and is pushing UAA and UA will spring up to join it. Maybe just UA leap calls?

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#2

Some thoughts.

Who says they have to revert? How much is the borrow on the short side?

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#3

Things like this can last longer and get wider than you think they should, sometimes by 10%+. There is no arbitrage unless you can actually convert one type of shares to the other (I don’t think so in this case), so you’re just hoping they converge instead of diverge more. I wouldn’t do options - timing is uncertain and trading them is expensive. If I wanted to bet on this (no opinion), I would go long / short the stocks.

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#4

They went back to lockstep, but not in the the way I wanted. LOL.

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#5

Long/short would have worked. Long only, not so much (-16% on poor earnings, guidance).

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#6

Good thread. Let’s keep an eye out for other pairs that might converge.

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#7

It is back again… but they report earnings tomorrow…

#8

There is the potential for other differences, right? The company might do some type of conversion that would effect one and not the other? The company may do a buyback of only voting shares? Etc.?

#9

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It has corrected itself again.

The big issue I see between the two is if the big boys are allowed to buy UA vs UAA.

As far as company buyback, You don’t have to worry about that with UA right now :stuck_out_tongue:. But honestly they are for all intents and purposes the same, one just has voting rights. Just like GOOG and GOOGL.

Which, if you are buying alphabet right now (I wouldn’t) then buy GOOGL. They are almost priced identical and you get the voting rights. A year or two back there used to be a significant price difference in them.

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