Nike Faces Dual Challenges: Regulatory Scrutiny and Founder’s Stock Move

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The American sportswear behemoth Nike is confronting pressure on two distinct fronts. Concurrent investigations by a U.S. regulatory body and a significant reclassification of shares by its founder have introduced fresh uncertainty for investors, compounding existing operational headwinds.

A notable transaction involving company founder Philip H. Knight has captured market attention. On February 2, Knight, who holds the title of Chairman Emeritus, converted approximately 4.5 million Class A shares into Class B stock.

Financial analysts were quick to clarify the nature of this move: it constituted a restructuring of share classes rather than a sale of equity. Knight maintains a substantial direct stake in the corporation, holding over 40 million shares across both classes following the conversion. However, such activity by a major insider often draws scrutiny during periods of market volatility.

EEOC Probe Alleges Systematic Bias

Separately, Nike is the subject of an investigation by the U.S. Equal Employment Opportunity Commission (EEOC). The agency is examining allegations that the company’s internal diversity, equity, and inclusion (DEI) policies may have inadvertently resulted in discrimination against white employees and applicants, a claim of systematic racial bias.

Court documents made public this week reveal the EEOC is seeking to enforce a subpoena originally issued in September 2025. Investigators have requested comprehensive data related to employee terminations, internship programs, and leadership development initiatives. In a statement, Nike expressed frustration with the legal action, calling it a "surprising and unusual escalation" given the company's ongoing cooperation with the agency.

Operational Landscape Remains Pressured

These developments unfold against a backdrop of existing business challenges for the athletic apparel leader. The company is currently contending with compressed gross margins and a slowdown in its critical Chinese market, where sales declines and heightened promotional activity are weighing on performance. Its direct-to-consumer segment has also recently shown signs of weakness.

In a move to streamline operations, management announced a round of job cuts in late January. For shareholders, the current environment presents a complex risk profile. The potential for a reputation-damaging legal dispute, combined with the urgent need to revitalize performance in China, is likely to sustain elevated share price volatility in the near term.