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Investopedia explains 'Breakup Value'
If a company is performing poorly, or the stock has not kept up to the perceived level of "full value", investors may call for the company to be split apart, with proceeds returned to investors as cash, stock in spun-off companies, or a combination of both.
Investors can also calculate a breakup value on a perfectly healthy company as a way to determine a potential floor for the stock, or a potential entry point for a prospective buyer. In order to accurately calculate a company's breakup value, detailed data is needed on the revenue, earnings and cash flows for each distinct operating unit of the company. From there, relative valuations based on publicly-traded industry peers can help to derive a value for the segment as a spun off stock.
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