Staples' Tracking Stock Headache.

• Position: Brief Article

New issues of tracking stock -- secondary stocks issued by major companies seeking to capture value from corporate spinoffs and Internet ventures --- are having a predictably tough time getting traction these days. But the decision by Staples Inc. to withdraw the planned initial public offering of Staples.com tracking stock drew attention to more than just the desultory state of the IPO market.

That's because a board-approved plan proposed allowing a number of company insiders and outside investors to cash in their shares of the tracking stock at a value far above the value it had 18 months ago, when the company started selling shares in private transactions. That plan -- modified somewhat since it was first announced -- is part of a broader proposal to convert Staples.com stock into Staples Inc. common stock.

But the decision to value the tracking stock shares at $7 -- compared to the $3.25 it was valued at in fall of the 1999 -- has blistered some investors and fund managers. They maintain that the collapse of many e-tailers since then suggests that the stock...