As of last Friday's close, shares of Under Armour Inc. (NYSE:UA) had risen nearly 17% year to date to just over $102 per share.
Some investors were understandably shocked, then, when they awoke Monday to see Under Armour trading right around $51 per share -- a seeming 50% drop! Of course, by now most have already realized this "plunge" wasn't the result of some terrible business development, but rather Under Armour's previously announced 2-for-1 stock split.
As the Fool's Steve Symington explains in the following video, investors need to remember that stock splits are a zero-sum game. In this case, while the price for each of Under Armour's shares was indeed cut in half, Under Armour simply doubled its shares outstanding to compensate by giving each investor one additional share for every share he or she already owned.
However, Steve also explains that there are a few notable reasons Under Armour wanted to perform this particular split. To learn what they are, check out Steve's full take in the following video.
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Steve Symington owns shares of Under Armour. The Motley Fool recommends and owns shares of Nike and Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.