WHY ISSUE TRACKING STOCK? INSIGHTS FROM A COMPARISON WITH SPIN-OFFS AND CARVE-OUTS

In recent years, tracking stocks, which amount to a new form of corporate restructuring, have been gaining in popularity. In 1999 alone, 17 companies announced new tracking stock issues, and by February 2000 there were 40 tracking stocks trading in the U.S. equity markets. Why have tracking stocks become so popular in recent years? In this article, the authors present new evidence on the effectiveness of tracking stock issues in creating shareholder value as compared to the record of two other closely related forms of corporate restructuring-spin-offs and equity carve-outs. 2001 Morgan Stanley.