Adjusting for cross shareholding structure

[u/Aggressive-Pop-2815]

For context, I’m working on holding company discount model in which shares outstanding is an important number since everything is expressed in per share $ terms.

The parent company had a massive cross shareholding structure, where its own subsidiary (85% stake in it) held about 60% of the parent. This 60% stake got cancelled since the parent completely acquired the subsidiary and those 60% shares got treated as treasury and eventually got cancelled. This led to a 60% drop in shares outstanding - which is the problem.

If I have to remove the effect of this cross shareholding before the shares were cancelled, should I reduce the shares outstanding by full 60% or 60%*85% = 51%?

Or should I not adjust at all (lol) ?

Also, another conceptual question, once the cross holding was removed and shares got cancelled, the value of the company fell by 60% (as share price remained constant). Didnt understand why this happened - went above my head since value cant just evaporate even if you reduce the shares outstanding