What is a Holding Company? C.Wolf Industries
In other words a holding company is a firm that owns the outstanding stock of other companies. Which means that that the company does not produce or manufacture goods itself, but owns the shares of other companies that produce the goods and services. Holding companies reduce the risk for the owners since their primary benefit is that they in itselff are protected from loss.
How it works
Let's say Company ABC is raising capital and agrees to sell 55% of its shares to Company XYZ in return for $1 billion in cash and debt. Company XYZ and Company ABC remain separate entities and have separate management teams, but because Company XYZ owns 55% of Company ABC's shares, it can vote however it likes and essentially override the wishes of the rest of the shareholders. Accordingly, it has tremendous control over who is elected to the board and who the board employs to run the company, as well as whether and how the company raises more capital or changes operational direction.