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Hopefully. And Hopefully they cancel the Warrants. And Hopefully they decide not to raise $100+ Billion. And Hopefully they decide to release them from Conservatorship. And Hopefully the Treasury will be generous and give us a few hundred Billion dollars back. And Hopefully ... You get the drift.
Lots of "Hopefully's" that Commons are very dependent on occurring for their investment to do well.
Moelis works and there's a whole lot less Hopefully's in their plan.
Only need ~90% run from here to get back to where we started the year. After Moelis, I'm not sure how much more up-side will be left for Average Joe's.
Will Ackman's next report show further Preferred Rotation?
Considering all this volume without the price moving much, it seems someone is either Shorting heavy or a large player is Rotating to Preferreds.
Time will tell.
Berko might still be pressing his Short Commons position with Moelis just around the corner. It would make sense, there's still too much uncertainty in the Commons for most risk appetites.
Commons will probably set new lows before things turn around.
Yeah, it's gonna be EPIC. The Average Joe's are gonna lose it! I heard a few of them are already drawing up the legal paperwork to challenge this once it occurs.
Magic as in precedence? Yeah, that kind of MAGIC
https://seekingalpha.com/article/123307-why-citi-common-shares-crashed-and-why-common-preferred-may-be-problematic-too
It's insane to think the Treasury is storing $80B in capital to return to the GSEs upon their release. Is that magic? That's magical math at least, I will give you that. Since the GSEs just barely cleared their 10% hurdle as per the original terms of the bailout. They won't be getting much back, if anything.
Unless Preferreds get ~5x from here on Conversion at Par. Then, they become Average Joe's and get to participate in all of the up-side along with the other Common shareholders.
Have you thought about that yet? Certainly possible, and dare I say "Likely" ... ?
The 5x return on Conversion to Commons is a nice incentive as well. Compared to the 2-3x return Commons could see to the IPO price.
Preferreds are the safer bet and actually have more upside in a Conversion scenario.
This deserves to be stickied. Math is powerful. It's a shame more people on this board can't stick with the facts and calculate things as they are likely to become.
MOELIS
I meant in terms of ending the Conservatorship. Sorry I didn't clarify that. Yes, those terms are in HERA; however, it doesn't say if the GSEs meet one of these criteria that they can end the Conservatorship.
The GSEs could be adequately capitalized, but that doesn't necessarily mean the Conservatorship will end.
Did Carlos feed you this garbage? Sometimes I think you are him. They will not release the GSE's until they are fully capitalized.
There is no magical escrow account with the NWS payments, the funds have all been used as per previous Treasury reports.
There is no definition in HERA or anywhere else with "Critically Undercapitalized," "Significantly Undercapitalized," or just "Undercapitalized." These are all just illusions in someone's head (Carlos'?) that have no merit in determining how/when the GSEs will be released.
This is a good analysis of the factors that will all affect Commons future valuation.
I think #3 is more likely to be new Preferred Shares rather than Commons. Reason being, the GSEs sold Preferreds a few months before the take-over and it will be easier to sell Preferreds than Commons at their current price.
This would likely only happen if existing Preferreds agree to a conversion as the new Preferreds would demand a quarterly dividend. I would be shocked if they sold Commons and didn't convert existing Preferreds, but this has been the Wild West thus far.
Selling Commons to raise ~$100B would be quite devastating to future valuations, hence your $0.30 would be a realistic number if that occurs. As has been pounded into the heads of Average Joe's over the last few years, Commons are still a very high risk investment.
So they're saying Commons are already fairly valued? Since most companies only get 10-15 PE and we're almost at 10 now, that doesn't bode well for future gains.
This is bad news.
We should fill the gap at $1.37 too. Best to do it now rather than later.
Can you do a worst case scenario on the Commons also?
It's actually kind of easy, I'll help: They Could Get Cancelled!
This is the Fannie Mae board though, so I'm only posting re: Fannie Mae. I know you're excited about Freddie since you have a big stake there.
At least you were wise enough to get Freddie instead of Fannie. FMCC will do better over the long-term and it should continue to perform better compared to FNMA.
Only took 4.5 million volume to move .04. Wonder how much volume it'll take to go up .10 ... ~12 million?
That's hardly a good measurement of these things. If there were 2x more buying interest, we would be at a much higher price. For every buyer, there's a seller. True buying interest drives the price up, this is a Rotation.
Everyone better jump on this 200x opportunity ASAP! Average Joe's are gobbling up all the cheap shares
New Preferred shares is the more likely route for the capital raise. But they can't do that unless they a) pay existing Preferreds a dividend, or b) Convert existing Preferreds to Commons.
B seems like the obvious scenario since this is what they did right before they were thrown in Conservatorship. It would be quite devastating for future earnings per share if they sell ~$100B of Common shares at these prices.
Looking for red today due to unsubstantiated optimism. Nothing has changed
This is just a proposal, nothing is set in stone. The numbers could certainly go up or down from here depending on what Mnuchin determines is adequately capitalized.
Can't start the party without capital, and can't get capital without selling more shares.
Looks like ~$100B in Commons dilution is coming.
That's a significant impact to future earnings per share. Seems like $7-9 by 2020 is a good conservative estimate for Commons based on a 15x multiple
Why does the FHFA consider Preferreds as Capital and not debt? Carlos, please help me understand because you've been saying Preferreds are debt for a long time. Are you wrong or is the FHFA wrong?
"Using the statutory definitions, core capital means the sum of the following (as determined in accordance with GAAP): (i) the par or stated value of outstanding common stock; (ii) the par or stated value of outstanding perpetual, noncumulative preferred stock; (iii) paid-in capital; and (iv) retained earnings. "
Only in Carlos' Crazy head do they have that much capital. Everything else (financial docs) says they have next to no capital.
Sounds like Jeff has been Converting to Preferreds
The rumors about some of the leaders of the Average Joe movement swapping from Commons to Preferreds must have been true. I knew it!
A Conversion to Commons sounds better to us. Not to mention, the GSE's won't have capital to redeem Preferreds. Conversion is the logical conclusion.
We're all just Average Joe's on the inside. Preferreds are just the intelligent minority of the AJ's since we saw this coming years ago.
Get your umbrellas ready, it's going to be raining dilution upon exercise of the Warrants and Conversion of Preferreds.
Better round that up to $100. Average Joe's will need at least triple-digits to buy their Camaro and move out of their parents' basements.
Judges have thoroughly reviewed HERA and disagree with all of Carlos' conclusions. Maybe Carlos' interpretation of the law is incorrect.
Carlos' article referenced material from 2008 and 2011. Both of which are older than the 2012 Treasury Report regarding what they intend to do upon exercising the Warrants.
That report has more updated information and it's more relevant than anything that Crazy Carlos has ever posted. He should try finding information from newer material that isn't out-dated
The reality of the Treasury Report is sinking in for Average Joe's. We should've endorsed Moelis while we had the opportunity. Instead, a couple of bad apples attacked Politicians and Government Officials and even flagrantly lied about them endorsing the AJP. It sure seems those actions back-fired on the Commoners as the price has been dropping ever since.
From the Treasury Report:
"Upon the government’s exercise of the warrants, the GSEs would be required under the terms of the PSPAs to apply the net cash proceeds to pay-down the liquidation preference of the senior preferred stock"
Looks like Carlos' article had the opposite effect. If anything, that article has accelerated the Common to Preferred Rotation.
Once they realized his math is awful, nothing else he says matters besides to a few senile Average Joe's.
Your whole formula is wrong. LOL, that's some awful math.
If you want a reverse stock split (10x1) so they can up-list, you would trade 10 shares for 1 share, and the price would go from the current $1.42 and become $14.20. You don't magically make money in a stock split, you end up with the same dollar amount at a different price per share.
You seem to not have a grasp on simple math, that's really scary.
The dilution and Preferred conversions will create liquidity for Shorts to exit either way, so there's no short squeeze on the horizon.
The number of Shorts has dropped significantly the last few months. Most are probably covering at these prices. Some might be waiting for a sub-$1 shock drop (probably on the announcement of Moelis).
Release the SEC Letter to the American People! The one about how the Warrants are illegal and can't be exercised. We should all be able to read and validate its contents!
It's an official document. So we have the face the facts. There's absolutely no reason to own Commons until there's more visibility into which plan the Admin decides on.
The market will continue to remind all of the Average Joe's that there's still an immense overhang of dilution and possibly even Cancellation of Commons.