Tracking stock
Encyclopedia
Tracking stock or targeted stock are specialized equity offerings issued by a company that is based on the operations of 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. 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.
, 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 is 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.
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.
Subsidiary
A subsidiary company, subsidiary, or daughter company is a company that is completely or partly owned and wholly controlled by another company that owns more than half of the subsidiary's stock. The subsidiary can be a company, corporation, or limited liability company. In some cases it is a...
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. 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.
Examples
During the dot-com bubbleDot-com bubble
The dot-com bubble was a speculative bubble covering roughly 1995–2000 during which stock markets in industrialized nations saw their equity value rise rapidly from growth in the more...
, 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
The Walt Disney Company
The Walt Disney Company is the largest media conglomerate in the world in terms of revenue. Founded on October 16, 1923, by Walt and Roy Disney as the Disney Brothers Cartoon Studio, Walt Disney Productions established itself as a leader in the American animation industry before diversifying into...
, which issued a tracking stock for go.com
Go.com
Go.com is a web portal first launched by Jeff Gold, and now operated by the Walt Disney Internet Group, which is a part of The Walt Disney Company. The portal includes content from ABC News, ESPN, and FamilyFun.com, all of which are associated with Disney and are hosted under a .go.com name...
. At around the same time, as the bubble ended, Disney retired the tracking stock. AT&T
AT&T
AT&T Inc. is an American multinational telecommunications corporation headquartered in Whitacre Tower, Dallas, Texas, United States. It is the largest provider of mobile telephony and fixed telephony in the United States, and is also a provider of broadband and subscription television services...
(AWE) and Sprint Corporation (PCS) also established tracking stocks for their cellular telephone operations, but neither of these tracking stocks is still outstanding.
As of 2007, one major company in the United States that still has tracking stocks is Liberty Media
Liberty Media
Liberty Media Corporation is an American media conglomerate and the control is exercised by company Chairman John C. Malone, who owns a majority of the voting shares....
. Liberty has three tracking stocks, each of which is divided into two classes.
- Liberty Interactive Group
- Liberty Capital
- Liberty Entertainment
Among other examples, in 1999 Quantum Corp.
Quantum Corp.
Quantum Corporation is a manufacturer of tape drive, tape automation, data deduplication storage products and scalable file storage software, based in San Jose, California...
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
Maxtor
Maxtor Corporation, founded in 1982 and acquired by Seagate Technology in 2006, was an American manufacturer of computer hard disk drives, the third largest in the world immediately prior to acquisition...
and redeemed the HDD tracking stock.