Taking Stock

FRAMINGHAM (02/18/2000) - Of the nearly 40 tracking stocks announced since 1984, all but five remain tracking stocks, reflecting their parent corporations' expectations that they may have more potential on Wall Street than the parent company's.

Hughes Electronics, a business unit of General Motors and a GM tracking stock since 1985, is an example. "We believe Hughes is the process by which we're going to introduce advanced communication into automobiles, so it behooves us to continue to hold it as a tracking stock," said Catherine Dunsby, manager of financial communications at GM.

But tax implications, a change in strategic direction or a shift in the business climate can lead a company to spin off a business unit underlying a tracking stock, creating an independent company, Dunsby said. That's what GM did with EDS. It had been a GM tracking stock since 1984, but GM spun it off in June 1996.

When a tracking stock is split off, the parent company offers its shareholders the option of exchanging their stock in the parent for stock in the new company, Dunsby said.

If a company doesn't want to turn the business unit into a separate company, but no longer believes the business unit has value as a tracking stock, it may decide to redeem it by buying back the shares.

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

More about EDS AustraliaHolden- General MotorsHughes ElectronicsWall Street

Show Comments
[]