Investors have tracked the notion of stock splits for more than two generations now. The problem is that stock splits do not actually change the fundamentals of a company. Some investors even argue that they could weaken the investor base, while others argue that splits allow more investors to get into a stock.
Under Armour Inc. (NYSE: UA) traded up 3% to $120.93 right after the opening bell on Monday. The news: it announced a two-for-one stock split. This is actually the second split, after a prior two-for-one stock on July 10, 2012.
Under Armour said in its release:
The stock split will be effected in the form of a stock dividend of one share of Class A Common Stock for each share of Class A Common Stock outstanding and one share of Class B Common Stock for each share of Class B Common Stock outstanding. The additional shares issued as a result of the stock split will be distributed on or about April 14, 2014 to stockholders of record on March 28, 2014.
Kevin Plank, chairman and CEO, signaled that the goal of this stock split was to broaden the investor base and also to improve the trading liquidity of Under Armour’s stock.
Again, splits change nothing about a company’s fundamentals. That being said, investors still generally love seeing splits in growth stocks. Under Armour still pays no formal dividend, and the stock just hit a new all-time high above $121 after the news.