11/21/2023 0 Comments Emc stock splits historyThe value attributed to a tracking stock will be based in part on the performance of the tracked business and, as a result, movement in the price of tracking stock may not align with movement in the price of the rest of the issuer company’s stock.īy providing the market with both a better view of and a way of attributing value to, a company’s distinct businesses, separately traded classes of tracking stock may help unlock value and increase an issuer’s overall market capitalization. Importantly, a class of tracking stock may be followed by a different group of analysts from the rest of the issuer company – thereby facilitating individualized market analysis and valuation. Tracking stock generally is listed and publicly traded separately from the issuer’s other stock and has its own ticker symbol. Whichever construction is employed, the “tracking” function is generally structured by tying dividends payable to holders of tracking stock to the performance of the tracked business(es), and/or rights in respect of the value attributable to the tracked business(es) in the context of a sale or similar exit event. (B) a separate class of tracking stock for each of its different businesses (A) a separate class of tracking stock to track all or a portion of the issuer’s interest in the tracked business, in addition to ordinary common stock, Tracking stock can be structured in a variety of ways, including Tracking stock is a special, separately traded class of common stock for which the return is linked to the financial performance of a discrete “tracked” business or set of businesses. In a more unique context, in connection with Dell’s pending acquisition of EMC, a portion of the merger consideration to be paid to EMC stockholders will consist of shares that will track a portion of EMC’s ~80% interest in VMWare. Tracking stock also was recently utilized by Fidelity National Financial to separate its title operations from its investment activities, after the latter came under criticism from activists. Notably, Liberty Media has continued to use tracking stocks throughout its long history of complex acquisitions, spin-offs and structuring, most recently splitting its common stock into three new tracking stocks (each with its own high-, low- and no-vote subclasses) to separately track its holdings in the Atlanta Braves, Sirius XM Radio and its other media assets (including its interest in Live Nation Entertainment). The trend lost steam about a decade ago, with a number of examples – particularly those that sought to realize value from first gen internet businesses – suffering significant losses following the bursting of the dot-com bubble. These included telecoms (including AT&T and Sprint) utilizing tracking stock for their nascent (and capital intensive) wireless businesses chemical and pharma companies (including DuPont and Genzyme) introducing tracking stock in respect of their different operating units and others (including Disney and DLJ) issuing tracking stock in respect of online businesses. Companies subsequently used tracking stock as a tool to monetize undervalued divisions throughout the 90’s and early 00’s during this period of popularity, companies across industries issued approximately 40 different classes of tracking stock. Tracking stock was first introduced by General Motors in the mid 80’s in connection with its acquisitions of Electronic Data Systems and Hughes Electronics, businesses that were clearly distinct from GM’s historic operations. Tracking stock, which allows a company to issue separately traded classes of stock tied to distinct portions of its business, offers one potential method to bridge the gap between the increasing push for pure play stocks and maintaining the benefits of diverse business units under one corporate parent. Furthermore, the spin-off/divestiture route may pose other challenges – such as the embryonic nature of a new division, the absence of sufficiently developed operations to be a full-fledged standalone company, adverse tax consequences of a separation or a desire to maintain control – which make a spin-off or divestiture undesirable or untimely. For many companies, in particular in the technology, media and telecommunications (TMT) space, maintaining diverse business lines can serve a strategic purpose despite different growth trajectories, profitability and trading multiples. While some companies may have assets or business lines ripe for divestiture or spin off, targets of shareholder activism are often resistant to the clarion call to the “pure play” evolution process – and for good reason. Shareholder activists, and the institutional investors who are increasingly supporting them, continue to press public company boards to take bold steps to unlock the value contained in their various businesses.
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