Why a holding company is worth less than the sum of its parts

What a holding company is and why it is hard to value

A holding is a company whose value lies not in its own operations but in the stakes it holds in other companies — sometimes in dozens of different businesses, from tourism to industry. When you buy a holding's share, you are not buying one business but a basket of businesses, plus (or minus) whatever sits at the level of the holding itself: cash, debt and the cost of management.

That is why a holding is not valued with a single ratio like P/E (price/earnings). The standard approach is called **SOTP — "sum of the parts"**.

How SOTP works

The idea is simple:

• For each stake the holding owns, a value is estimated — if the company is listed, its market capitalisation (price × number of shares) multiplied by the ownership percentage; if it is not listed, it is estimated from profit or EBITDA (earnings before interest, taxes, depreciation and amortisation — a rough measure of operating earnings).
• All the stakes are added up.
• Cash at the holding level is added, debts are deducted.

The result is NAV — net asset value: what the basket would theoretically be worth if you took it apart and sold it piece by piece.

…and here the "problem" appears: the market pays less

Almost everywhere in the world, a holding's share trades below its NAV. The difference is called the holding discount and typically amounts to 10–30%. It is not a market error but the price of real shortcomings:

1. You cannot take the basket apart. A small shareholder cannot force the holding to sell its stakes and distribute the cash. The value "on paper" exists, but it cannot be reached.
2. Double costs. The holding's management costs money, and below it every company has its own management. That cost eats part of the return every year.
3. Tax on the way out. If the holding sold its stakes, it would pay tax on the gains — a part of NAV the shareholder never sees.
4. Capital is not always returned to owners. The proceeds from selling one stake are often reinvested by management into a new project instead of being paid out — and the new project can be worse than the old one.

An example with a made-up holding

Imagine Holding X, which owns: 60% of a tourism company whose stake has a market value of €300 million, 100% of an unlisted manufacturer valued at €150 million, and €50 million of net cash. NAV = 300 + 150 + 50 = **€500 million**.

If Holding X's shares are valued at €375 million in total on the exchange, the market is paying a 25% discount. That is neither "cheap" nor "expensive" in itself — it is information. The questions that follow from it: has the discount historically always been this large? Is it changing? Is there a reason it might ever close (e.g. an announced sale of a stake or a payout)?

How we do it

On this platform we value holdings precisely with the SOTP method, with two rules we consider fair:

• The discount is measured, not assumed. Where a history of price and NAV exists, we compute how large the discount actually was over time and use the measured range. Only where measurement is not possible do we use a standard range, clearly flagged as an assumption.
• An integrated operating owner is not a passive holding. A company that controls and consolidates its subsidiaries in the same industry (running them as one business) gets a small discount or none — the shortcomings described above largely do not apply to it.

Every SOTP analysis on the stock pages shows the breakdown by parts, the applied discount and the reason it is what it is. The example is illustrative and does not refer to any specific company; nothing in this text is a recommendation to buy or sell.