TRACKING Rise, Fall,
STOCKS Revival
By Lawrence A. Cunningham and
Patrick T. Brennan
Tracking stocks, corporate equity of a
parent tied to the economic performance
of a subsidiary, were the 1984 brainchild
of Georgetown University tax professor
Martin D. Ginsburg, late husband of Jus-
tice Ruth Bader Ginsburg. Professor Gins-
burg’s design, still used to this day, solved
a problem for H. Ross Perot, the colorful
Texas billionaire.
In 1984, when General Motors Co.
(GM) acquired Perot’s company, Elec-
tronic Data Systems (EDS), he and his
many employee-shareholders were con-
cerned that EDS’s performance would
be lost within the GM behemoth. They
wanted to ensure that any outperformance
of EDS would be rewarded regardless
of how the rest of GM performed. The
solution: they accepted shares in GM, but
performance was tied to the economics of
EDS, aptly dubbed “Class E stock.”
Ginsburg’s invention was so effec-
tive that GM copied it the next year
when acquiring Hughes Aircraft Com-
pany — using currency dubbed GM “Class
H stock.” Both trackers remained in place
for more than a decade until GM spun the
companies off, distributing all of GM’s
stock in them to GM shareholders to form
freestanding companies.
GM’s tracking stock worked well for all
concerned, especially Perot, who showed
his gratitude by endowing a professor-
ship at Georgetown: the Martin D. Gins-
burg Chair in Taxation. While Ginsburg’s
legacy extends far beyond tracking stocks,
this contribution has had a volatile his-
tory: initial plaudits and proliferation by
the dozens, followed by widespread criti-
cism and unwinding of nearly all and, of
late, a renaissance — and another spotlight
on GM.
Prospectus of the Liberty Media Corporation, split
off from AT&T Corporation, dated June 14, 2001.
28 FINANCIAL HISTORY | Fall 2017 | www.MoAF.org