Why Apple’s $14.5 Billion Tax Fine Is Worse for Shareholders Than it Looks

Shares of the iPhone maker fell just 82 cents, or less than 0.8% on Tuesday, to $106, after a European tax commission said Apple had to pay the $14.5 billion in back taxes, plus interest, that it had avoided paying European governments for years because of a sweetheart deal with Ireland. EU regulators found that Apple was paying a tax rate of 0.5%, when it should have been paying 12.5% if it were actually following Ireland’s tax rules.

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Indeed, the technology giant will have no problem covering the fine. Apple has $231 billion in cash and investments. The EU levy would eat up just 6% of that. What’s more, the company generated nearly $11 billion in cash flow from operations in the last quarter alone. And then there’s the rumbling among some analysts that Apple may not even have to pay the full amount. Both the computer company and Ireland are likely to appeal the ruling. Even if Apple loses, it may be able to offset some of that cost with U.S. tax credit.

Still, the multi-billion dollar tax hit could slice a bigger chunk out of Apple’s bottom line and its share price than it appears.

See also: Why Ireland’s Government Doesn’t Want Apple’s Money

First of all, shares of Apple (AAPL) trade at a price-to-book ratio of 4.5 times the iPhone makers’ net worth. That means shareholders have been valuing every dollar of net assets that the iPhone maker holds at $4.50, presumably on the assumption that Apple will be able to turn those assets into more money. That means if Apple has to shell out (no tax pun intended) $14.5 billion in cash, that should slice $65 billion off of Apple’s market value. Yet, Apple’s market capitalization fell less a tenth of that on Tuesday or around $5 billion.

It is true that Apple’s cash probably gets a lower premium than some of its other assets, like say its patents. But it’s also probably not one-to-one either. Subtract the cash, and the rest of Apple’s assets trade at 7 times its book value. That would be more than Google’s price-to-book value of just over 4 times earnings, and around what Facebook’s assets are valued at. But both of those companies are growing their revenue much faster than Apple, and should get a higher book value.

See also: What the Web Is Saying About Apple’s $14 Billion Tax Fight With Europe

As for Apple’s bottom line, the company made $39 billion in its fiscal 2014, which ended in September and the last year covered by the tax deal. That represents about 20% of the profits it made during the 11-year period covered by the $14.5 billion tax fine. So if Apple had paid its full taxes, it would have owed nearly $3 billion in extra taxes.

Assume it will have to pay those taxes in the future, and expected earnings this year would drop to $41 billion. Apply Apple’s p/e ratio of around 12 to that, and you get a market cap of $482 million, or roughly $88 billion less than where the stock trades today.

Apple has lived in a world for more than a decade—or probably more like two—where it hasn’t had to pay much taxes on a good portion of its earnings. Investors, it appears, still believe they are living in that world.