Steel Partners Holdings LP: Governance Overhaul and Tax Shield Strategy Unlock Hidden Value

The Steel Partners Holdings LP (SPLP) annual meeting on May 23, 2025, marked a pivotal moment for the company, as unitholders approved transformative governance reforms and a critical amendment to its Limited Partnership Agreement (LPA). These changes, coupled with robust financial performance and strategic compliance measures, position SPLP as a compelling investment opportunity. Let's dissect how governance discipline, tax shield preservation, and operational momentum are primed to unlock this undervalued asset.

Governance Reforms: A Catalyst for Investor Confidence

The election of five independent directors—James Benenson III, Eric P. Karros, John P. McNiff, Lon Rosen, and Rory H. Tahari—signals a decisive shift toward stronger corporate governance. With a one-year term mandate and the adoption of annual say-on-pay votes, SPLP is aligning itself with best practices to enhance transparency and accountability. This move not only satisfies shareholder demands but also reduces agency risks, a critical factor for long-term value creation.

The ratification of Deloitte & Touche LLP as the auditor further reinforces credibility, while the OTCQX reporting compliance ensures timely and transparent disclosures. By adhering to the Alternative Reporting Standard, SPLP is signaling its commitment to investor trust—a stark contrast to peers who often lag in disclosure rigor.

Tax Shield Protection: A $53.3M Game-Changer

The amendment to the LPA to extend NOL carryforward protections for three years is the linchpin of SPLP's value proposition. These tax shields, which provided a $53.3 million income tax benefit in 2024 alone, are now safeguarded against dilution, ensuring SPLP can maximize future tax savings.

For context, NOLs are a finite resource. By locking in their preservation, SPLP has effectively insulated itself from potential tax liabilities, freeing up capital for reinvestment or dividends. This is particularly strategic as the company's liquidity improved to a net cash position of $62.2 million, with total debt reduced to $119.7 million—a 36% decline from 2023.

Financial Resilience: Growth Amid Sector Divergence

SPLP's diversified portfolio is delivering results. Despite a 19% decline in energy segment revenue, strong performances in Diversified Industrial (+8% Q4 revenue), Financial Services (+9% annual revenue), and Supply Chain integration drove full-year revenue to $2.028 billion (+6.4% YoY). Adjusted EBITDA surged 25.9% to $303 million, with margins expanding to 14.9%—a testament to operational efficiency.

The net income jump to $271 million (+76% YoY) underscores the power of tax optimization and cost discipline. With leverage dropping to 0.9x and liquidity at $470 million, SPLP is financially agile to capitalize on opportunities or weather sector headwinds.

Why Act Now?

• Undervalued Metrics: At current prices, SPLP trades at a fraction of its intrinsic value. With a net cash position and $53.3M in annualized tax benefits, the stock is primed for re-rating.
• Strategic Portfolio: The mix of industrial, financial, and supply chain assets creates a natural hedge against economic volatility.
• Governance Credibility: The board refreshment and say-on-pay reforms eliminate governance overhang, reducing investor hesitation.

Conclusion: A Rare Confluence of Catalysts

Steel Partners Holdings LP has navigated a critical inflection point. The LPA amendment and governance reforms eliminate key risks, while its diversified operations and tax efficiency fuel earnings momentum. With compliance measures boosting transparency and a net cash position bolstering flexibility, SPLP is poised to outperform.

For investors seeking a high-conviction, multi-catalyst play, SPLP offers a rare combination of valuation upside, operational strength, and structural improvements. The time to act is now—before the market catches on.

This analysis assumes no position in SPLP. Always conduct independent research or consult a financial advisor before making investment decisions.