Definition: A stock that is issued to track a certain division of a company. This allows managers and executives for each division to have rewards and compensation tied to the overall performance of the part of the company they control.
Also Known As: Letter Stock
Examples:
Sprint had a cell-phone division. They announced that they were going to create a 'tracking stock' so the market could value that particular division as opposed to having it absorbed in the company. Each Sprint shareholder was given 1 share of PCS for every 2 shares of Sprint they owned. Thus, they traded as two different stocks on the New York Stock Exchange, but PCS was owned by Sprint and only represented a division of its business.
