Adidas shares have plummeted amid bribery and corruption charges involving a top sports marketing executive who is responsible for the German-based sports apparel and footwear company's basketball division. As the company's stock dipped more than 2.5 percent in Frankfurt trading, North America Adidas shares sank more than 2.5 percent.
The investigation conducted by the Federal Bureau of Investigation (FBI) might have a direct effect on Adidas' major growth. According to The Street, sales in North America have increased 29 percent to $1 billion last month, which is growing faster than Nike, according to TheStreet.
Corruption charges
The FBI arrested James Gatto, the director of global sports marketing at Adidas, on Tuesday for his role in a bribery scheme, compensating thousands of dollars in bribe to pressure high-schoolers to attend specific universities associated with the brand, and then eventually sign a deal with Adidas once college basketball stars jump to the National Basketball Association.
"We became aware that federal investigators arrested an Adidas employee. We are learning more about the situation. We're aware of any misconduct and will fully cooperate with authorities to understand more," Adidas spokeswoman issued a written statement.
A total of 10 people, including four NCAA basketball assistant coaches as well as financial advisors and managers were also involved in the arrest for participating in a corruption scheme.
Among top-tier universities, which employed coaches, contained Auburn University, University of Arizona, Oklahoma State University, University of Southern California and the University of Louisville.
Flagship of sponsorship
Adidas has grown into a top global sportswear brand in the world after facing the market share decline for five years.
Recently, the company has taken the place of Nike-owned Jordan Brand as the No. 2 most popular sportswear brand in the country by market share, according to market research firm NPD Group Inc.
"This is an achievement I never thought I would see in my lifetime," NPD sports analyst Matt Powell acknowledged regarding Adidas' sales growth earlier this month.
Gatto's role at Adidas was seen as a substantial part of its high school and college basketball agendas, which would possibly enable the brand to aggressively leverage marketing interests, benefits, and assets from basketball-driven schools in an unethical approach. The brand has long-term deals with big-time universities, including Kansas, Indiana, Louisville and others.
In terms of "flagship programs," Nike maintains a strong relationship with the University of Oregon, where Phil Knight graduated, and Under Amour has a devoted connection with the University of Maryland, where Kevin Plank attended in the late 1990s. Adidas does not have an intimate association with the school yet. However, some speculated that Louisville, which sealed a 10-year, $160 million extension deal with Adidas this year, should be the company's flagship.
