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$20
18
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14
12
10
8
6
4
2
0
Dec 27, '13 Feb 12, '14 Mar 28, '14 May 13, '14 Jun 26, '14
Valhi Inc

Source: Bloomberg

Oh.6 The stock closed yesterday at $6.01, reducing the value of the estate's holdings by $2.8 billion -- and its estate-tax liability by $1.1 billion -- since Simmons's death.

Is that good news or bad news for the estate? Well, the first law of tax is that it is always better to have more money than less money.7 It's not actually a good idea to lose $2.8 billion of money to save $1.1 billion in taxes.

Though the estate didn't exactly lose $2.8 billion of money. That tax liability is a cash expense: You've actually got to write a check to the IRS for $1.9 billion (using the December valuation) or $765 million (using yesterday's valuation8), so the $1.1 billion you save is an actual cash savings. The $2.8 billion loss, on the other hand, is a paper loss. Perhaps it's just temporary. If there were some reason to think that it didn't reflect only a decline in the fundamental value of Valhi, you might not worry as much about that paper loss as you would about the cash taxes.

So what's happened to Valhi? Well, it's not having a great year, with zero-ish net income last quarter. The board reduced the dividend by 60 percent, to its lowest level since 2005. And the few people who follow the stock are unimpressed. Bloomberg shows two analysts following Valhi, Barclays and EVA Dimensions. They both have sell ratings, and Barclays has a price target of $5.00, saying in May that "from a SOTP analysis, we continue to view VHI as trading above its intrinsic value." A Seeking Alpha piece from a few weeks ago is similarly gloomy, with a $6 per share fair value.

All of this suggests that Simmons's estate owes less tax because it's really worth less than it was six months ago. In fact, if you taxed Simmons's heirs now based on the value of Valhi six months ago, they'd have almost nothing left of their stock.

But there's one more bit of the story. On June 11, about two weeks ago, the Harold Simmons Foundation -- the charitable foundation controlled by Simmons's heirs -- filed with the SEC a plan to sell all of its 2.5 million shares. That's not a lot of stock, exactly -- just 0.7 percent of the company, worth around $16 million at the time of the filing -- but it is a lot relative to the usual volume of trading in Valhi. Remember, 93.8 percent of Valhi is owned by Simmons's heirs and never trades. Between December 27, 2013, and June 10, 2014, Valhi traded an average of 42,311 shares a day, so the foundation's shares represented almost 59 days' volume.

It sold them in 11 days:

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