Pairs trading with dual-class shares: Long UA, short UAA
Pairs trading with dual-class shares: Long UA, short UAA
The voting premium in Under Armour shares sits at 2.29% — more than 4× wider than Alphabet’s tight 0.54% dual-class spread. With both Armour classes down -21% over the past month, the pair presents a mean-reversion trade in dual-class arbitrage.
What Is Dual-Class Arbitrage?
Many companies issue two share classes that are economically identical — same dividends, same claims on assets — but differ only in voting rights. Founders love this: they raise public capital without surrendering control. The market, however, almost always prices the voting shares at a premium, because control has value, especially during activist campaigns or M&A events.
Pairs trading exploits this: you go long the cheaper class and short the expensive class, betting the spread converges. Because both legs represent the same underlying business, you’re hedged against market direction — you only profit or lose on the spread itself.
The Live Playing Field
Here are the major U.S. dual-class pairs as of Aug 13, 2026, ~1:04 PM EDT:
| Pair | Voting Class | Non-Voting | Spread | Premium |
|---|---|---|---|---|
| Alphabet A (GOOGL) / Alphabet C (GOOG) | $345.96 | $344.10 | $1.86 | 0.54% |
| Under Armour A (UAA) / Under Armour C (UA) | $5.35 | $5.23 | $0.12 | 2.29% |
| Berkshire A (BRKa) / Berkshire B (BRKb) | $760,226 | $507.16 | Ratio 1,499× vs 1,500× | 0.07% |
Alphabet’s spread is razor-thin — the most liquid pair in the world, arbitraged to near-perfection. Berkshire’s conversion ratio is almost exactly at fair value. Neither offers much edge right now.
The Pick: Long UA / Short UAA
Under Armour C (UA) at $5.23 vs Under Armour A (UAA) at $5.35 gives us the widest relative spread in the major dual-class universe at 2.29%.
Why this pair, why now:
- Identical economics, different prices. Both classes earn the same dividend, have the same claim on cash flows. The only difference is one vote per Class A share. Paying 2.3% extra for a vote on a $5 stock with a struggling retail brand is expensive insurance.
- Mean-reversion setup. Both classes dropped -21% in one month — identical pain. But the spread widened rather than narrowed during the selloff, suggesting forced selling in the more liquid Class A. Historically, Armour’s voting premium has oscillated between 1–5%; at 2.3%, it’s in the upper half.
- Market-neutral hedge. Long UA + Short UAA in equal share counts means a 10% drop in Armour stock affects both legs equally — your P&L only moves on the spread, not the stock.
How the Trade Works
| Leg | Action | Price | Shares (per 1,000 pair) |
|---|---|---|---|
| Long | Buy UA | $5.23 | 1,000 |
| Short | Sell UAA | $5.35 | 1,000 |
| Net credit | $120 |
If the spread narrows to 1% ($0.05), UA rises to ~$5.28 and UAA to ~$5.33: you profit $70 on the spread compression. If it blows out to 5%, you lose money — which is why a stop-loss at ~4% spread is prudent.
Why Not Alphabet?
Alphabet A (GOOGL) / Alphabet C (GOOG) is the benchmark for dual-class arbitrage — $4.2 trillion in combined market cap, substantial liquidity, and a spread that’s been below $5 for years. But at 0.54%, the edge is too thin to overcome transaction costs for most traders. It’s a parking lot for institutional capital, not a retail opportunity.
Risks to Watch
- Liquidity trap: UA averages ~1.1M shares/day vs UAA’s ~3.5M. Slippage on the short leg can eat your edge.
- Catalyst risk: If an activist approaches Armour, the voting premium could explode wider, not narrower — the exact opposite of what you want.
- Borrow cost: Shorting UAA requires borrowing shares; if borrow fees spike, the carry cost erodes the spread profit.