tracking stock

noun

Definition of tracking stock 

: a stock the value of which is linked to the performance of a company division but which does not confer ownership in the company or the division

Examples of tracking stock in a Sentence

Recent Examples on the Web

How much will owners of Dell’s VMWare tracking stock get paid? Aaron Pressman, Fortune, "How Dell Technologies Is Going Public Without an IPO," 2 July 2018 The complicated deal announced earlier this week involves Dell buying up the VMware tracking stock that was created to help fund the company’s last big move—the late 2016 acquisition of EMC. Dan Gallagher, WSJ, "Why VMware Needed to Cover Dell’s Tab," 5 July 2018 The tech giant will return to public markets by buying out its tracking stock, DVMT, in a cash and share-swap deal valued at $21.7 billion, Dell said in a filing Monday. Bloomberg, latimes.com, "Dell stock will trade publicly again, five years after leveraged buyout," 3 July 2018 At Amazon Go, customers needn’t even pull out their wallets to pay, thanks to an app that tracks stock and charges their accounts automatically. Jane Black, WSJ, "Welcome to the New Convenience Store," 25 Apr. 2018 The data is training algorithms that read images to track stock on shelves. Tom Simonite, WIRED, "Some Startups Use Fake Data to Train AI," 25 Apr. 2018 The MSCI Emerging Markets Index, which tracks stock markets’ performance across 24 countries, including China, Brazil and India, has risen 1.5% this year, cruising past the S&P 500’s 0.4% loss and the Stoxx Europe 600’s 2.7% decline. Ben Eisen, WSJ, "Why Emerging-Market Stocks Are Outperforming the U.S.," 12 Apr. 2018 Futures contracts that track stocks in the United States traded erratically, suggesting that the markets on Friday could be in for another day of uncertainty. Matt Phillips And Tiffany Hsu, New York Times, "Stocks Plunge as Market Enters ‘Correction’ Territory," 8 Feb. 2018 The BlackRock fund has gained more than 3 percent this year, but that’s less than half the 7 percent the iShares Edge MSCI USA Momentum Factor ETF has returned tracking stocks that have performed the best over the past six to 12 months. Sarah Ponczek, Bloomberg.com, "Value's for Chumps as Market Puts Momentum ETFs Into Overdrive," 18 Jan. 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'tracking stock.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of tracking stock

1989, in the meaning defined above

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Statistics for tracking stock

Last Updated

26 Jul 2018

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Time Traveler for tracking stock

The first known use of tracking stock was in 1989

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More Definitions for tracking stock

tracking stock

noun

Financial Definition of tracking stock

What It Is

A tracking stock is a security that is issued to track the performance of a wholly-owned subsidiary.

How It Works

A large, diversified company may issue a tracking stock based on one of its wholly-owned subsidiaries. The company may do this because it believes that the subsidiary's performance will be very different (much better) than the parent company.  The use of tracking stocks was a relatively common strategy employed by companies during the technology growth boom of the 1990s.  Parent companies would launch subsidiaries based on new products and services, such as Internet service companies.  Because these "spin-offs" were stripped of the diseconomies of scale and cost centers within the parent company's operations, their stock performance was expected to soar.

Examples of tracking stocks were The Walt Disney Company's wholly-owned subsidiary "go.com."  Other examples include regional branches of national cell phone operators.  Eventually, most tracking stocks are absorbed by the parent company as the operations and the tracking stock's performance come into line with the parent's stock.

While the tracking stock is based on the subsidiary's financial performance, it is legally and financially bound to the parent company.   For accounting purposes, while the financial performance of the tracking stock company is reported separately, it is ultimately consolidated within the parent company's financial statements

Why It Matters

A tracking stock pays a dividend on the basis of the shares issued under the tracking stock itself and not on the basis of the parent company.  However, holders of tracking stock have equity in the parent company's shares.

Source: Investing Answers

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