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Finance Best Practices
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equity markets that will result in a high share price, and therefore considerable
cash received by the corporate parent. Usually, the parent company retains some
measure of ownership over the business unit.
Another option is the spinoff, which is a simple distribution of shares in the
business unit to existing shareholders as a stock dividend. This approach is usu-
ally taken when the corporate parent wishes to completely sever its ownership of
a business unit, frequently because it does not fit into the overall area of corporate
focus.
Finally, the corporate parent can issue a tracking stock in a business unit.
This requires no new legal entity, and therefore no separate board of directors.
Shares are usually issued as a stock split from the shares of the corporate parent,
with shareholders receiving a claim on the future earnings of the designated busi-
ness unit; the parent continues to control the unit. This approach is usually taken
when the parent feels the value of the unit will increase on the equity market,
resulting in gains for shareholders.
No matter which of these approaches is taken, there are a number of benefits.
First, investors receive operating and financial information about a specific busi-
ness unit, which gives them more information upon which to make investment
decisions. Second, the value of shares is more tightly linked to the performance
of specific business areas, which is also of use to investors. Third, business units
can bring in equity capital for their own use, which may improve the amount of
cash available to them than would be the case if they were competing for corpo-
rate funding with other business units. Fourth, subsidiaries can use their own
stock to engage in merger and acquisition activities. Finally, creating stock for a
business unit is a powerful incentive for its business managers if they are given
stock options that are linked to those shares, since the managers have a major
impact on the future value of the business unit.

Cost: Installation time:

11–4 USE INTERNET-BASED TECHNICAL ANALYSIS SERVICES

Some investors believe that the future performance of a stock can be determined
by a careful evaluation of how it has performed in the past. While others feel that
this is akin to driving down a road by looking in the rearview mirror, it may still
have some validity for reviewing historical trends and making investment deci-
sions based on this information.
Technical analysis information can now be obtained on the Internet by
accessing www.techrules.com. This site uses a simulation laboratory, in which
prospective investors can enter either a single stock or a weighted portfolio, and
determine their historical performance, including the impact of trading costs and
profit reinvestment. There is also a page that converts this information into a