Tracking stock is the stock that is issued by a firm that is supposed to track or follow a single business unit of the firm.
The reasons firms issue tracking stock include wanting to sell shares in a subsidiary that is in a "hot" industry, to allow analysts to better follow the division (minimally there are now separate financial statements released), and to use in rewarding management and employees of the subsidiary.
There are problems with this. The most notable is that the new stock is still really stock in the old firm. Thus the new stock holders do not have their own board of directors. This creates a potentially serious conflict of interest.
GM and Marathon Oil were amoung the first to issue these securities but have been followed by many other firms who have been spinning off their "dot.coms" in order to take advanatge of a hot internet market during late 1999.
Tracking stock links
The first two links are required reading! You will be glad you did! :-)
The best description of what tracking stock is comes from Billet and Mauer (1998) paper.Other less academic articles
McKinsey Quarterly has a very good article on tracking stock and other ways to divest
Morningstar has a partial list of who has issued tracking stock
http://news.morningstar.com/news/MS/ShortList/990903shortlist.html
For a good description of the differences between tracking stock and other forms of divestitures http://www.spinoffstocks.com/glossary.htm
Not sure how this is listed (usually WSJ articles ar not) but it is
good and from the WSJ.
http://www.biocognizance.com/_bcforum/00000317.htm
from Invest-Faq
http://invest-faq.com/articles/stock-tracking.html
from Quantum (a firm that did a spinoff)
http://www.quantum.com/quantum/pc/presskits/tracking_stock_faqs.htm
a proposal to tax tracking stock
http://www.abanet.org/tax/groups/corp/ctcomments.html
an about.com section on tracking stock
http://investmentclub.about.com/money/investmentclub/library/weekly/aa122499.htm?iam=dpile&terms=Tracking+stock
from investopedia
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