With corporate structures evolving and Australian companies seeking new ways to attract capital, tracking stocks are once again drawing attention. These unique securities offer exposure to a specific segment of a business—think of them as a window into a company’s most exciting division, without buying shares in the whole enterprise. But how do tracking stocks actually work, and what should Aussie investors watch out for in 2025?
Tracking stocks—sometimes called ‘letter stocks’—are shares issued by a parent company that are designed to mirror the performance of a particular business unit or division. Instead of spinning off a division into a separate entity, companies use tracking stocks to give investors targeted exposure while retaining full legal ownership of the underlying assets.
Globally, tracking stocks have been used by companies like Dell, Disney, and AT&T to unlock hidden value. In Australia, the concept is gaining renewed interest as local firms look to showcase high-growth subsidiaries in tech, renewables, or financial services.
Several factors are fueling a resurgence of tracking stocks on the ASX and beyond this year:
In early 2025, several Australian firms in fintech and renewables have signaled plans to issue tracking stocks to highlight their fastest-growing operations. This trend is expected to accelerate as market volatility continues and investors seek more focused bets.
Tracking stocks come with both unique advantages and pitfalls:
In 2025, ASIC is closely monitoring how companies structure and disclose tracking stock arrangements. Recent policy updates require enhanced transparency around intra-group transactions and clearer reporting of financials for tracked divisions. Investors should scrutinise company disclosures and pay attention to voting rights, dividend policies, and potential conflicts between tracking stockholders and ordinary shareholders.
If you’re considering adding tracking stocks to your portfolio, keep these strategies in mind:
Seasoned investors are increasingly using tracking stocks as tactical plays to gain exposure to Australia’s hottest growth sectors, from green energy to digital payments, without betting on an entire conglomerate. But the devil is in the details—always look beyond the headline growth story to the fine print in company disclosures.