Tracking Stock


DEFINITION of 'Tracking Stock'

1. Common stock issued by a parent company that tracks the performance of a particular division without having claim on the assets of the division or the parent company. Also known as "designer stock".

2. A type of security specifically designed to mirror the performance of a larger index.

BREAKING DOWN 'Tracking Stock'

1. When a parent company issues a tracking stock, all revenues and expenses of the applicable division are separated from the parent company's financial statements and bound to the tracking stock. Oftentimes, this is done to separate a subsidiary's high-growth division from a larger parent company that is presenting losses. The parent company and its shareholders, however, still control the operations of the subsidiary.

2. The most popular tracking stock is the QQQQ, which is an exchange-traded fund that mirrors the returns of the Nasdaq 100 index. Another type of tracking stock is Standard & Poor's depository receipts (SPDRs), which mirror the returns of the S&P 500 index.

  1. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  2. QQQQ

    The previous ticker symbol for the Nasdaq 100 Trust, an ETF that ...
  3. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs ...
  4. Parent Company

    A company that controls other companies by owning an influential ...
  5. Subsidiary

    A company whose voting stock is more than 50% controlled by another ...
  6. Carve-Out

    The partial divestiture of a business unit. A company undertaking ...
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