Steel Partners Holdings: Assessing the "Cheap" Narrative After Delisting and Recent Price Moves

The market's recent attention on Steel Partners Holdings is driven by a powerful combination of strong returns and a significant structural change. Over the past month, the stock has delivered double digit returns, building on a 13.83% year to date share price return and a solid one-year total shareholder return. This momentum sits atop a remarkable five-year track record, with the stock posting a 5 year total shareholder return of a little under 3x. For investors, this creates a classic setup: a compelling historical performance narrative is being reinforced by fresh, positive price action.

The catalyst for this renewed interest is the company's formal announcement on April 11, 2025, that it intends to voluntarily delist its Common Units and Series A Preferred Units from the NYSE and deregister from SEC reporting requirements. The plan is to move trading to the OTCQX platform, a shift that introduces clear liquidity and transparency risks. The company has explicitly warned that there is no assurance that brokers will continue to make a market in its units or that trading will persist on the OTCQX. This move, while likely driven by a desire to reduce listing and compliance costs, fundamentally alters the investment profile of the stock.

This is where the core question emerges. The recent price strength and the delisting announcement are now both part of the public record. The market sentiment has clearly shifted from a long-term hold story to one of near-term catalyst-driven interest. The key analytical task is to determine whether the stock's strong performance-both over the past year and in the immediate term-already reflects the anticipated benefits of the delisting, or if there remains a gap between current price and the stock's underlying value. In other words, is the news already priced in, or is there still asymmetry to capture?

The Valuation Paradox: Low P/E vs. High Risk

The most immediate puzzle for investors is the stark contrast between a seemingly cheap valuation and a high-risk profile. On the surface, the numbers point to a bargain. Steel Partners Holdings L.P. (SPLP) trades at a trailing P/E ratio of 4.31, a figure that appears deeply undervalued against typical market multiples. This low multiple suggests the market is pricing the company for poor earnings, which is a classic setup for a value trap. Yet, the company's own financial health metrics tell a different story. It holds a perfect Piotroski Score of 9, a strong signal of robust financial quality and operational efficiency.

This creates the central paradox. A low P/E ratio typically signals cheapness, but SPLP's historical context reveals why that signal is unreliable here. The company's mean historical PE Ratio over the last ten years is -3,167.68. That figure isn't a typo; it's a reflection of extreme volatility where earnings have swung wildly between massive profits and catastrophic losses. The current positive P/E is a statistical outlier against a decade of negative averages. In other words, the market is pricing the stock based on a single quarter of earnings, while the historical record screams that those earnings are not guaranteed to be sustainable.

The delisting announcement amplifies this risk asymmetry. The move to the OTCQX introduces tangible liquidity and transparency risks that can pressure even fundamentally sound stocks. The company has explicitly warned that there is no assurance that brokers will continue to make a market in its units. This structural change can lead to wider bid-ask spreads and make it harder for investors to exit positions, effectively increasing the perceived risk of holding the stock. For a company with a history of volatile earnings, this added friction can disproportionately affect its valuation.

The bottom line is that the low P/E ratio is a double-edged sword. It reflects the market's skepticism about the durability of current earnings, a skepticism that is entirely justified given the historical data. At the same time, the perfect Piotroski Score suggests the underlying business is well-managed. The risk is that the delisting catalyst may not be enough to bridge the gap between these two realities. The current price may already be pricing in the high risk, leaving little room for error if earnings disappoint again.

The Asymmetry of Risk: What's Priced In?

The investment case for Steel Partners Holdings now hinges on a stark asymmetry of outcomes. The potential payoff is enormous if the company successfully navigates its transition and the market re-rates its fundamentals. The risk, however, is a liquidity crunch that could crush the stock regardless of underlying business health. The key forward-looking event is the successful execution of the delisting plan, which will determine if adequate price discovery and liquidity persist.

The primary catalyst is the move to the OTCQX platform. The company expects trading to begin there on or about May 2, 2025, following its formal deregistration. The critical question is whether brokers will continue to make a market. The company has explicitly warned that there is no assurance that brokers will continue to make a market in its units or that trading will persist. This is the single biggest risk. If liquidity dries up, the stock could become a "thinly traded" asset, vulnerable to wide bid-ask spreads and sharp price swings. For a company with a history of volatile earnings, this added friction could disproportionately pressure the valuation, turning a fundamental opportunity into a liquidity trap.

On the flip side, the upside case is built on a successful transition and a re-rating based on strong fundamentals. The company's perfect Piotroski Score of 9 signals robust financial health, and its revenue base is substantial. A Peter Lynch fair value model applied to the stock suggests a potential gain of 693.89% from the current price. This extreme upside implies that if the delisting proceeds smoothly and the market begins to appreciate the underlying business quality-free from the stigma of a volatile earnings history-the stock could re-rate dramatically. The asymmetry is clear: the downside is a liquidity crunch, while the upside is a powerful re-rating.

The market has already priced in a significant portion of the "cheap" narrative. The stock's low P/E ratio and its move near a 52-week low before recent gains suggest deep skepticism about earnings sustainability. The recent double-digit returns over a month may be the market digesting the delisting news, but they also leave little room for error. If earnings disappoint again or if the OTCQX transition fails to attract sufficient trading interest, the stock has nowhere to go but down. The risk/reward ratio, therefore, is highly dependent on the successful management of the delisting catalyst. For now, the setup is one of high potential reward, but only if the company avoids the liquidity trap.