Why would a mutual fund plummet on the same day it pays its annual distribution & capital gains?

Question

Two mutual funds I follow both plummeted on the same day that they paid out their annual dividends and capital gain distributions. (The rest of the year was relatively stable.) The timing seems too coincidental -- is there a standard/natural reason why this sort of drop might happen on "dividend day"?

The funds are FLVCX (dropped 27% on 2016-12-02) and NBSSX (dropped 9% on 2016-12-16).

Note that a sudden price drop on "dividend day" can be good for investors if they are reinvesting dividends: the lower the share price on that day, the larger number of shares they receive.

Answer 1

The price of a share of a mutual fund is its Net Asset Value (nav). Before the payout of dividends and capital gain distribution, the fund was holding both stock shares and cash that resulted from dividends and capital gains. After the payout, a share only holds the stock.

Therefore once the cash is paid out the NAV must drop by the same amount as was paid out per share. Thus of course assumes no other activity or valuation changes of the underlying assets. Regular market activity will obscure what the payout does to the NAV.