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Bradford - restructure the Treasury's agreement with the GSEs, it doesn't say restructure to give the JPS investors a windfall ... yadda yadda yadda ...
What it is saying is Treasury and the GSEs will figure out a way for the Senior Preferred Shares to be restructured, not the Junior.
That is a pretty ginormous leap of faith from an investment standpoint to think that snippet points to a windfall restructuring for the Junior Preferred Shares where the person who issued those shares, former CFO of the GSEs Tim Howard, called the JPS shares a "quagmire."
Words matter ... or at least that's what I'm told ...
JJ - If JPS has no dividends and no conversion, what is the allure? = Quagmire.
At least Commons are P/E sensitive ...
Good Luck!
Donot - 100% False - JPS do not do better first. In fact JPS will lag because they need divies and a conversion is not a sound investment strategy for a company that has paid the government $300 billion.
FnF & soon to be a new FHFA director (will take time to get up to speed) doesn't need to deal with JPS. This is why Lamberth is the only thing Pagliara is touting because he knows that is the only opportunity to obtain a remedy.
No Federal judge will allow one shareholder group be harmed by another shareholder group as terms to a settlement. And that is the backstop, as there are a myriad of other reasons no conversion will happen.
In fact, a predatory conversion will create more litigation that will further delay any potential capital raise as the whole legal premise of the NWS and conservatorship become a quagmire like the JPS trade.
CET1 capital is not comprised of JPS. Why convert? Why not just raise on the open market after NYSE uplist providing a favorable SCOTUS ruling?
It would cost the company less ... FnF, as it stands now, will be in charge of raising capital and they want to do that over 5 years. There will be a fiduciary duty of the BOD to maximize savings and optimize a captial raise without carving out special treatment for JPS, otherwise here comes even more litigation.
There are a lot of litigation issues that prevent JPS from benefiting while Commons benefit on P/E sensitivity.
There is a reason Tim Howard - former GSE CFO - spoke to the JPS shares being a "quagmire" trade. It wasn't a passing comment. The former CFO was the one who actually issued the JPS shares you are invested in.
I'm sorry, but the amount of gates JPS needs to go through to be successful is vast. Commons are P/E sensitive and it is that simple.
I'm betting on a total of 5 billion outstanding shares for Fannie total post capital raise and warrants, although I don't think the warrants are excercised as all 120+ companies that received a bailout were allowed to repurchase the shares. Net the warrants to 0 as part of the $30 billion overpayment.
A plethora of creative financial ways to get this done after a favorable SCOTUS ruling.
Rob, if you believe the JPS theory, I have a bridge to sell you in the metro NYC area ...
JPS is a quagmire trade. Bradford says FnF leadership is looking forward to recap, but they already asked for 5 years to raise capital. So Bradford wrote a word document with no substance or anything new.
Tim Howard, the former CFO of the GSEs who issued the very JPS shares JPS investors are in, called their trade a “quagmire” and that JPS investors are inventing scenarios to get out of their trade.
The proof of their false theories will be a subsequent post from this one from kthomp.
Skeptic - I suspect that is very false. I suspect you have quite a large JPS position relatively speaking ...
Good luck!
For Bradford's article, why is Fannie's CEO wanting to raise capital a big deal?
They told Calabria in the cap rule comments they wanted 5 years to raise capital. Not much has changed since the cap rule commentary ... ok ...
Massive reliance on a prior administration's easily changeable letter agreement where almost all commentators and critics were in unanimous agreement that the LA was virtually all optics.
The only group that didn't think the LA was virtually all optics were the JPS investors ...
Tim Howard, the former CFO of the GSEs who issues the very same JPS shares JPS investors are invested in, said the JPS trade is currently considered a "Quagmire" because there is no clear path out of it.
- No Divies
- No Conversion
- A long time to wait
- Not P/E sensitive
The list goes on ... JPS are sooo emotionally invested in their trade they really can't see the forest beyond the trees ... *sigh*
Skeptic - JPS is in a Quagmire trade and Commons will outperform JPS from here ... good luck!
FnF themselves asked for 5 years to raise capital, but Bradford and other JPS think it needs to be much faster ... Do words matter? I guess only if it supports your narrative ...
Stop the merry-go-round, I want to get off ...
Quagmire ... Giggidy...Giggidy... nothing has changed ...
Donot - so you believe FnF should pay the gov $305 Billion and give up %80 of the companies also?
Regardless, if that were to happen, it would be further litigated for many years to come with no cap raise and no dividends for a long, long time.
Draconian indeed and will be appealed for a long, long, long time. Need to see the bigger picture ... JPS twist in the wind forever ...
JJ - don’t need JPS - they can wait until capital is built and raised responsibly over a period of years. You should focus on Lamberth in June 2022 and see what JPS gets out of that. No predatory conversion is possible for many reasons, and a full backstop is no federal judge would approve a remedy that damages a 3rd party not associated with the contract litigation.
There is a reason Tim Howard calls JPS shares a “quagmire” trade, and he is the former CFO of the GSEs who issued the very same JPS shares you guys are invested in. Tim Pagliara is emphasizing JPS to assuage his investors’ ruffled feathers. There is a reason he is focusing on Lamberth in June 2022.
May JPS win their Lamberth claims and profit through damages there.
Good Luck - I’ll take Scotus within a couple months for Commons ...
Here is a very basic way to view the JPS investment thesis, which is so laser focused on the financial angle they can’t see the more important legal and political perspectives.
JPS’s theory of how the Gov/FHFA will address/speak to this situation after a favorable Scotus ruling:
“Guess what, everyone, FnF received $180 billion from us (the gov) and repaid $300 billion back to us, netting us $124 billion dollars in profit. That equals a whopping %67 ROI for us (the gov).
So now that Scotus has basically told us (the gov) we need to honor the intent (9/10ths of the law) of a conservator to conserve and preserve our ward’s assets, and that Scotus has de facto or de jure 0’d out the liquidation preference, we are still going to do more to help us (the gov) generate more money.
We (the gov) know FnF repaid us orders of magnitude more than AIG, Citi, Insurance companies, Auto Industry, etc, but we don’t care. We are going to go further to profiteer from the GSEs.
What we (the gov) plan on doing on top of the $124 billion we netted on our PSPA investment is to now take %80 control of FnF because we can and we will for no other reason that we can - so too bad.
But wait, shareholders, there is more. We know both Common and JPS shareholders have completely lost control of their company, and both have been left out in the cold going on 13 years, but we are going to reward only the JPS shareholders and destroy the Common shareholders.
Sorry, even though we (the gov), have already profited at $124 billion, we are going to take these measure to spite shareholders, and especially Commons because we can’t use one tiny bit of creative financing to manage this situation so it is equitable for all shareholders. We (the US Treasury) who has 100s of years of industry experience doesn’t know how to restructure a company equitably that has already been paid to a net profit of over $124 billion dollars, equating to the best deal for us (the gov) since the Louisiana Purchase.
We (the gov) have no appreciation of what a $124 billion dollar windfall to us means within the historical context of the entire existence of the US republic. We do know this was the best investment deal we have ever made, but we are going to exploit and profiteer from FnF further.
Further legal considerations be darned because we don’t care. We will do more to extract every drop of blood out of the FnF stone, shareholders and legal challenges after our actions be darned.”
If you believe the above I have a JPS portfolio ... uh, I mean a bridge in Brooklyn to sell you ...
A JPS bagholder?
I love all the AIG and Citi comparisons to pump JPS. The Treasury “investing” $180 billion and being repaid by FnF at $300+ billion, where the gov netted $124 billion has no comparison. No company during the 2008 crisis came close to netting the gov a %67 ROI at this volume.
All of the JPS hopium for a windfall is misplaced. Par is a long way off if ever to be attained.
Watch what happens with the latest headfake.
JPS headfake ... watch and learn ...
Watch for the JPS HeadFake - more JPS bagholders to be made today ...
Don't worry, Amelia, JPS is being setup again ... The volume is less than 6k and the SP is popping ... get ready ... before close or on Monday ...
When did Tim Pags buy the extra ~250k?
I will not listen to their "stuff"
Settlement after Scotus may happen. But predatory fantasies are completely false ...
Thumbs-up! Ditto for you!
Bradford, How'd "the words have meaning ..." theory work for you with Mnuchin and Calabria?
To base an investment on an easily changeable letter agreement before a major legal event is just plain silly.
JPS fell by 50% compared to commons and Tim Howard, who issued the very JPS shares you are invested in, called your JPS investment a quagmire.
What more do you need?
The Letter Agreement has been torpedo'd by legal and industry experts and past insiders.
The Letter Agreement can be reversed the second Scotus rules on single director.
Amazing ... laser financial focus and no appreciation for the more important legal and political factors
settlement by converting JPS to dilute Commons would need to be approved by the court and would create more litigation ... You guys are hilarious ...
So laser focused on the financial aspect that the legal and political escape you ...
Potty - howabout the simpler answer that there are no dividends and no conversion for a long time and Tim Howard even called the JPS trade a quagmire.
Tim Howard raised capital pre-2008 by issuing the very same JPS you guys are invested in and he calls them a quagmire ...
Guys, the writing is on the wall. Diversify or be left twisting in the wind...
Bradford, and if there is an injunction granted against the PSPA? You really need to see the legal side. You JPS guys are laser focused on a dubious contract and a predatory restructuring. If you feel the APA claim is 100% for shareholders, have you really thought through the following legal shoes to drop ... *sigh*
From one side you state shareholders win at scotus, but from the other it is one sided ... sorry, it doesn’t work that way ...
Bradford, thank you for showing your true colors. You may want to try the conditional tense. This will not workout well for JPS. The market has spoken and you absolutely do not know more than the market as JPS has fallen a whopping %50+ relative to commons.
I hate to break it to you that no one in the JPS camp wants to admit, but if SCOTUS rules in favor of Ps, commons easily outperform and it won’t be close.
Stating the cap rule is set in stone as you do only sets you up for continual failure. There is at least a 50/50 chance the cap rule is updated to a more reasonable level, but that will take time and at historic low rates for the forseable future, commons continue to build capital. Also stating the letter agreement will continue to exist in its current form as a bedrock investment strategy is pure fantasy. Of all people you are conjuring scenarios in the JPS echo chamber to justify your positions.
Frankly I’m shocked and astounded you JPS guys had no clue Thompson was asking to have the liquidation Pref set to 0, deemed paid in full. Your twitter talisman was baffled by such a report which means most likely the rest of you in your echo chamber were unaware. If I thought all that was before Scotus was a request to end only the NWS, I would be 100% JPS also, but you guys made a spectacular mistake there. It is shocking ...
Why would Tim Howard call your JPS trade a quagmire? Most likely because it is true. If the opposite of everything you predict happens, doesn’t that tell you something? The first rule of getting out of a hole is to stop digging.
Bradford, some observations ...
Potty, why has JPS lost more than 50% value in relation to Commons? Commons are not nearly as far down as JPS ... Careful about missing the boat ...
Potty - 100% false
If the liquidation pref is deemed paid gov will do nothing with warrants. It would be challenged in n court again as profiteering/takings.
You JPS guys continue to look at this issue strictly through a financial lens. The legal and political lenses play a much more important role.
You are failing to see the big picture. There is virtually no realistic way JPS outperform Commons from here on out. The ratio will continue to fall.
FYI, Berkowitz expects dividends to be turned back on in years ... no conversion.
The JPS investment has sooo many variables to solve for it truly is a quagmire trade. Ignore Tim Howard’s advice at your own peril ...
Donot - the whole predatory restructuring premise is false. Proven by the inaction by Mnuchin.
Commons were trading more than JPS pre-conservatorship.
JPS traded at 5:1 ratio a couple months ago under the false premise that JPS would be predatorily restructured and converted to commons. 100% false ...
Commons will begin to reflect true P/E value providing SCOTUS rules favorably, regardless of direct or remand. It becomes academic once SCOTUS rules.
There are very few, if not absolute 0, scenarios where JPS outperform commons if there is a favorable SCOTUS ruling.
Fact
Rest assured the ratio between JPS and Commons has already reached its highest point at roughly 5:1 at the end of 2020. It is currently ~2.5:1.
The ratio will only continue to get worse as we get closer to SCOTUS. After SCOTUS I expect the ratio between JPS and Commons to be closer to 1.5:1. Once final resolution happens, I expect a 1:1 or 2:1 ratio on favor of commons depending on the preferred issuance.
Scotus could send commons significantly higher. JPS will get no appreciation from here vs commons going forward and will continue to lose value compared to commmons.
Tim Howard, exCFO of the GSEs says the Junior Preferred Shares of Fannie Mar are a quagmire trade and will continue to be a quagmire.
Does anyone have that quagmire midwest boutique investment firm that wrote the with certainly about JPS conversion? What a quagmire ...
Even with a prospective favorable SCOTUS ruling, Junior Preferred Shares have virtually no upside as they won’t be seeing any dividends for 4 years!
JPS are dead money even after a favorable scotus ruling. Commons will appreciate at several multiples based on PE. Sorry JPS, a quagmire trade ...
Jog - the biggest travesty will be how JPS shares won’t budge after a prospective favorable SCOTUS ruling. Commons will explode while JPS will just continue to twist in the wind ... that will be a major disappointment for all JPS ...
Skeptic - I don’t know what will happen but I like the chances of honest investors in commons...
Why spend so much time here if you don’t believe in the investment?
I get the sense Tim P has a lot of JPS exposure based on his latest shareholder call and Kaoboy does also. They’re doing what they can to prop-up the trade but if Berkowitz is selling and understands better than most as lead plaintiff in the Court of Federal Claims that they will not receive a windfall it demonstrates Berkowitz understands JPS is dead money even after a positive scotus ruling.
JPS needs dividends. The cap rule crushed those dreams. Commons trade based on P/E and are not constrained to a dividend play only.
Real Vision ... Kaoboy is going to introduce himself as what? Ex-Goldman? I have family members who are Ex-Goldman - who cares ...
Massive rotation from FNMAS, FNMAM, etc., into FNMA Commons. Does anyone have that image that shows the house on fire and the dog saying, "JPS investment is fine ...?" Because obviously the JPS investment is a complete and utter quagmire.
JPS Bagholders, do not get left behind! The JPS investment thesis on conversion to commons and dividends is dead on arrival as Trump, Mnuchin, and Calabria are gone.
What is the purpose of investing in a vehicle where the only attraction is dividends that will never be paid?
Trump, Mnuchin and Calabria are gone. Those three were the best hope for the JPS investment thesis. That thesis is now a complete quagmire and it is being dumped by Bruce Berkowitz from Fairholme funds. It is by far a better approach to be invested in a vehicle sensitive to P/Es like FNMA Commons than a dividend play via FNMAS, FNMAM, etc., that will never, ever see 1$ in dividends!
Smart billionaires are now moving out of their JPS positions = Bruce Berkowitz, the flag ship Fairholme JPS lead plaintiff in the Court of Federal Claims has sold half of his JPS position at this point in time and is most likely continuing to sell all of his position. That should speak volumes to the JPS contract claims they say will be a windfall. Obviously it won't be a windfall if the lead plaintiff - Bruce Berkowitz's Billionaire Fairholme funds - is liquidating their Junior Preferred Share positions!!!
Do not be a JPS bagholder and be left holding a JPS bag. There will be no conversion (died with Trump, Mnuchin, and Calabria leaving), and there won't be Dividends for Junior Preferred Shares until a reasonable Cap Rule will be implemented, which won't happen for several more years.
Plus, all litigation has to be settled ... convert now or forever be a JPS bagholder ...
JPS shares are in a quagmire. JPS shares are dead money even after SCOTUS ... Take it to the bank ...
Calabria is gone ...