Tracking stock is an innovative and effective way for a company to raise capital and diversify its portfolio. A tracking stock is a type of security issued by a parent company that “tracks” a certain division or segment of the corporation. Unlike a regular stock, the tracking stock's performance is linked to the success of the respective division, and not the performance of the whole company. This allows investors to gain exposure to one specific segment of the company, while the parent company can raise capital without diluting the overall company's voting power.

Tracking stocks are typically used by companies with multiple divisions. This allows the parent company to allow investors to get exposure to the growth potential of various business segments. By issuing a tracking stock for each segment, investors can benefit from the success of a specific division without having to purchase a share in the parent company. For instance, a company with a business segment that is growing rapidly can create a tracking stock which investors can purchase to gain exposure to that segment. In this way, the parent company is able to take advantage of the growth potential of the separate segments, while still keeping the voting power for the primary company.

Tracking stocks offer investors the same risk as any other stock because they don't typically include voting rights. Investors should be aware of the potential associated risks of investing in a tracking stock. The performance of the tracking stock is dependent on the success of the segment it tracks, so investors should carefully consider the growth potential of the segment before investing. Additionally, tracking stocks do not have the same level of liquidity as regular stocks, and investors should research the market for the tracking stock before investing.

Tracking stocks are a unique way for companies to raise capital and allow investors to benefit from the potential of specific divisions. By providing investors with the opportunity to gain exposure to one segment without having to purchase the parent stock, companies can maximize the capital that they can raise. As with any investment, it is important for investors to do their research before investing and be aware of the risks associated.