Tracking Stock

What is a 'Tracking Stock'

A tracking stock is a 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.

RELATED TERMS
  1. Wholly Owned Subsidiary

    A company whose common stock is 100% owned by another company, ...
  2. Taxable Spinoff

    A divestiture of a subsidiary or division by a publicly traded ...
  3. Minority IPO

    An initial public offering in which a parent company spins off ...
  4. Unconsolidated Subsidiary

    A company that is owned by a parent company, but whose individual ...
  5. Associate Company

    A corporation whose parent company possesses only a minority ...
  6. Parent Company

    A company that controls other companies by owning an influential ...
Related Articles
  1. Retirement

    7 Essential Questions To Ask Aging Parents About Their Finances

    No one wants to think about the aging of his or her parents, let alone plan for their death. Unfortunately, aging is a part of life, and in order to truly support your parents, it's best to start ...
  2. Managing Wealth

    Top Financial Planning Issues for Older Parents

    Clients who have children later in life present an opportunity for advisors. Here are the key the financial planning issues that need to be addressed.
  3. Retirement

    Helping Aging Parents Manage Their Money

    Old age can make dealing with finances difficult. Find out how you can help aging parents manage their finances and estates.
  4. Personal Finance

    The Booby-trapped World of Parental College Loans

    Private parent loans can help families pay for college. But the repayment timeline associated with the loans can hurt parents’ retirement savings.
  5. Investing

    What's a Subsidiary?

    A subsidiary is a corporation owned 50% or more by another corporation. The owning corporation is usually called the parent or holding company. A company that is 100% owned and controlled by ...
  6. Retirement

    How to Protect Your Parents from Financial Fraud

    How do you protect your parents from being victims of financial fraud before it happens? Here are some tips to help you minimize the risk.
  7. Investing

    What is a Spinoff?

    Businesses wishing to streamline their operations often sell less productive or unrelated subsidiary businesses as spinoffs.
  8. Markets

    What is a Wholly Owned Subsidiary?

    A company whose common stock is 100% owned by another company, called the parent company.
  9. Retirement

    7 Ways Baby Boomers Can Financially Assist Parents

    To help relieve some of the pressure that comes with caregiving, here are seven ways Boomers can financially assist elderly parents.
  10. Financial Advisor

    Top Tips for Family Wealth Transfers

    Essential tips for tackling family wealth transfers.
RELATED FAQS
  1. How do spinoffs impact investors in the both the parent and subsidiary companies?

    Learn about how spinoffs affect investors in both the parent company and the subsidiary and what strategies investors use ... Read Answer >>
  2. What is the difference between a subsidiary and a sister company?

    Discover the differences between subsidiary companies and sister companies, and understand how both are related to parent ... Read Answer >>
  3. How is taxation treated for both the parent and subsidiary company during a spinoff?

    Learn how the potential tax implications of a spinoff can affect both parent and subsidiary companies and how taxes may be ... Read Answer >>
  4. What is the difference between a subsidiary and a wholly owned subsidiary?

    Understand the primary differences between a subsidiary company and a wholly owned subsidiary, and their relationship to ... Read Answer >>
  5. Are domestic and foreign subsidiaries included on a company's financial statements?

    A subsidiary is a company that is controlled by another 'parent' company. The subsidiary acts and operates like its own entity ... Read Answer >>
  6. What are the tax implications for both the company and investors in a divestiture ...

    Learn the tax implications for a company and its investors in divestiture events, such as spinoffs, equity carve-outs, and ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center