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

For those of you who don’t spend the summer tracking stock prices, the market has been climbing to new highs since bottoming out in late December. Larry Edelman, BostonGlobe.com, "On Wall Street, do profits trump democracy?," 17 July 2019 Dell’s current plan to go public involves buying out that tracking stock for a mix of cash and shares in the resulting Dell entity, so enough opposition by holders of the tracking stock could stymie its efforts. Dan Gallagher, WSJ, "Dell Makes Its Case," 16 Sep. 2018 Another activist investor, Elliott Management Corp., which owns about a 4% stake in the VMware tracking stock, declined to comment on the deal. Cara Lombardo, WSJ, "Carl Icahn Unlikely to Push Dell for a Better Deal," 3 July 2018 Investors just poured heaps of cash into the $21 billion Technology Select Sector SPDR Fund, the largest ETF globally tracking stocks of technology companies. Carolina Wilson, Bloomberg.com, "The World's Largest Tech ETF Just Reeled in $616 Million in One Day," 9 Mar. 2018 The tracking stock closed at $84.58 on Friday, so the offer represents a 29% premium for the cash option and more than double what the tracking stock was worth when Dell first handed it out. Aaron Pressman, Fortune, "How Dell Technologies Is Going Public Without an IPO," 2 July 2018 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

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 2019

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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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