Why Netgear Stock Dropped Today

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What happened

Shares of Netgear (NASDAQ: NTGR) appeared to be down 35.7% as of 3:30 p.m. EST Wednesday -- but that's only because the networking products specialist completed its planned spinoff of Arlo Technologies (NYSE: ARLO).

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In a press release late Monday -- just before the New Year's Day holiday -- Arlo announced that Netgear completed its distribution to shareholders of 62.5 million shares of Arlo common stock, or the entirety of its roughly 84.2% stake in the wireless security camera leader.

So what

More specifically, assuming you were a Netgear shareholder of record at the close of business on December 17, 2018, this morning, your portfolio would reflect that you received 1.980295 shares of Arlo common stock for each share of Netgear you owned. Keeping in mind that any remaining fractional shares were paid in cash, that ratio equates to just under $20 per share based on Arlo's current stock price -- or a little more than the amount Netgear shares seemingly dropped today.

Now what

If one thing is clear, it's that Netgear's "plunge" today was a planned, zero-sum game that shouldn't leave investors alarmed. As it stands, Netgear can now better focus on driving the growth of its core networking businesses. And Netgear shareholders can now decide whether they want to continue holding their new shares of Arlo based on its own merits.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends Netgear. The Motley Fool has a disclosure policy.