Shares in 100+ Companies: Why Equity Stakes Are Valued

Over the years, our firm has valued equity stakes in more than one hundred Ukrainian companies across a dozen industries — from metallurgy and energy to food processing and finance. The stakes came in every size: a minority holder's handful of shares, blocking stakes, controlling interests. The question always sounds the same — "what is it worth?". The occasions for asking it, however, are surprisingly varied, and the most interesting ones have nothing to do with buying or selling.

Ten percent of the shares is not ten percent of the company

The first thing that surprises stake owners: the value of a stake is not calculated as a proportion. It would seem that if the whole company is worth a hundred million, a ten-percent stake should be worth ten. In practice — almost never.

A controlling stake confers power: to appoint management, distribute profit, set strategy. Buyers pay a premium for that. A minority stake confers no such power: its holder cannot influence dividend policy, sell assets or replace the director. Minority interests are therefore valued with discounts — for lack of control and for lack of marketability: selling a small stake in a non-listed Ukrainian company quickly and at a good price is close to impossible. The size of those discounts and premiums is a matter of analysis and substantiation, not a textbook table: the valuer works through the charter, the shareholder structure, the stake's actual powers. Between the two poles sit blocking stakes, with an arithmetic of influence — and a price — of their own.

Squeeze-outs and other occasions

The classic reasons to value a stake are well known: a sale, a new share issue, a contribution of shares to charter capital, an inheritance. But recent years added an occasion on which valuation became mandatory by law — the squeeze-out: the compulsory buyout of minority shareholders by an owner who has consolidated a dominant stake.

In a squeeze-out, the valuation is the only protection either side has. The majority owner must pay a fair price; the minority holder must sell — and the whole dispute reduces to a single number. The independent valuation report becomes the document on which the legality of the entire procedure rests: underprice it and face minority lawsuits, overprice it and overpay for your own consolidation. The same logic runs through the mirror procedure — the sell-out, where it is the minority holder who demands to be bought out: both lean on an independent valuation.

Shares that had to be won back in court

A separate chapter of our practice is litigation over the restoration of title to shares. It is a legacy of the paper era of the 1990s: shareholder registers were kept carelessly, entries "went missing", stakes were written off on forged documents. Years later a shareholder would discover the shares were gone — and go to court to restore ownership.

We have taken part in such cases repeatedly. The valuer's role there is twofold: to determine the stake's value at the date of loss — for calculating damages — and at the current date, for a decision on restitution or compensation. It is delicate retrospective work: the issuer's financial condition has to be reconstructed as of a date many years past, and the value substantiated from the documents of that era. It is in cases like these that a valuation for court proceedings is tested for strength: the report will be attacked by opposing counsel, and every figure must survive cross-examination.

How to value what doesn't trade

The overwhelming majority of Ukrainian joint-stock companies are not listed, so there is no screen price to look up. The valuer works from the issuer's financial statements and applies the standard valuation approaches: income — through projected cash flows, asset-based — through the value of assets and liabilities, market — where comparable transactions can be found. A minority holder faces an added complication: access to the issuer's internal information is limited, so the valuation rests on public reporting — a fact reflected in the report's assumptions. There is a practical detail as well: shares today exist in book-entry form, so the object is identified through depository statements — an "inspection" here looks nothing like the inspection of a plant or a vehicle.

If you hold a stake in a Ukrainian company — controlling or symbolic — and a transaction, dispute or corporate procedure lies ahead, start by understanding what it is actually worth: a share valuation moves the conversation from emotions and face values to substantiated figures. As the experience of a hundred-plus companies shows, those figures rarely match expectations — but they are figures you can work with.