Tracking stock, or targeted stock^[1], are specialized equity offerings issued by a company that is based on the operations of a a wholly owned subsidiary of a diversified firm. Therefore the tracking stock will be traded at a price related to the operations of the specific division of the company being "tracked". Tracking stock typically has limited or no voting rights^[1]. Often, the reason for doing so is to separate a high-growth division from a larger parent company. The parent company and its shareholders remain in control of the subsidiary's or unit's operations.

[edit] Examples

During the dot-com bubble, some companies that predated the bubble identified their Internet operations as high growth divisions that would benefit from a tracking stock. The best-known example is The Walt Disney Company, which issued a tracking stock for go.com. At around the same time as the bubble ended, Disney retired the tracking stock. AT&T (AWE) and Sprint Corporation (PCS) also established tracking stocks for their cellular telephone operations, but neither of these tracking stocks are still outstanding.

As of 2007, one major company in the United States that still has tracking stocks is Liberty Media. Liberty has three tracking stocks, each of which is divided into two classes.

• Liberty Interactive Group (NASDAQ: LINTA,NASDAQ: LINTB)
• Liberty Capital (NASDAQ: LCAPA, NASDAQ: LCAPB)
• Liberty Entertainment (NASDAQ: LMDIA, NASDAQ: LMDIB)

Among other examples, in 1999 Quantum Corp. issued tracking stock in two subsidiaries: its DLT and Storage Systems Group (DSS) and its Hard Disk Drive Group (HDD). Two years later in 2001, Quantum sold the Hard Disk Drive business to Maxtor and redeemed the HDD tracking stock.

[edit] References

1. ^ ^{a b} SEC page on tracking stock.

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