Conglomerate Discount

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DEFINITION of 'Conglomerate Discount'

A reference to the tendency of the stock market to undervalue the stocks of conglomerate businesses. Conglomerate discount is calculated by adding an estimation of the intrinsic value of each of the subsidiary companies in a conglomerate and subtracting the conglomerate's market capitalization from that value.

BREAKING DOWN 'Conglomerate Discount'

The conglomerate discount arises from the sum-of-parts valuation, and it is the reason why many conglomerates spinoff or divest subsidiary holdings.

Investors often point to the conglomerate discount as a market inefficiency and view the discount as a way to buy undervalued stocks.

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RELATED FAQS
  1. What is the difference between a green field and a brown field investment?

    Green-field and brown-field investments are two different types of foreign direct investment, or FDI. Green-field investments ... Read Full Answer >>
  2. Why is the 1982 AT&T breakup considered one of the most successful spinoffs in history?

    AT&T had a history reaching back to 1885 and, as a government-supported monopoly, was a highly profitable company. Colloquially ... Read Full Answer >>
  3. What are the differences between affiliate, associate and subsidiary companies?

    All three of these terms refer to the degree of ownership that a parent company holds in another company. In most cases, ... Read Full Answer >>
  4. Are domestic and foreign subsidiaries included on a company's financial statements?

    A subsidiary is a company that is controlled by another 'parent' company. The subsidiary acts and operates like its own entity ... Read Full Answer >>
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    When businesses decide to expand their operations to another country, one of the more important dilemmas they can face is ... Read Full Answer >>

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