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$20/sh x 5,000,000,000 shs = $100,000,000,000 paid in capital.
I know you asked me to show you the (simplistic) math, but is that what you really wanted to know?
Nice little piece on stock trading by our elected reps.
http://www.politico.com/story/2017/05/14/congress-stock-trading-conflict-of-interest-rules-238033
NWS could be ended, but not voided, to enable recap/release, which IMO will also most likely include warrant exercise AND significant recap dilution IF IF IF we get no relief from the 11K docs and/or other court actions.
Raising $100B with 5B shares assumes a pps of $20/sh. for companies trading at $2/sh. Not impossible, but we need to know a lot more about the corporate structure/governance (e.g., will they be utilities?)
agree, i'm as desperate as any long for a favorable outcome, but the equating of a good outcome for FnF with a good outcome for shareholders really baffles me.
tcj, fwiw, i totally agree. what is good for FnF and taxpayers could be very bad for common (and I am long 50k pre-cship shs). not sure why so many on this board don't seem to understand the distinction - or at least explain why it doesn't exist.
So basically no change in pps. Does that means the market still doesn't believe the NWS is going to stop - or that stopping it doesn't really mean that much (because something good for the organizations is NOT necessarily good for shareholders)? Seems like ones of these is why the pps didn't really move.
Observer, thanks for posting. I hope we have a different standing (allowable derivative claim?) that allows case before Sweeney to continue. If not, if wonder if that means the end to the 11,000 discovery docs ... and all eyes towards Delaware? shadow
along, do you think:
- there is nothing of significance in the 11,000 docs (even though in the very limited discovery released so far, the death spiral story was completely discredited)?
- you do think there is something very incriminating, but the courts won't care because of the anti-injunction provision?
- you do think there is something very incriminating, but by the time it gets to the courts, FnF will have been reformed by Congress/administration without any benefit to current shareholders?
TIA shadow
And that, as cap himself would say, is a mathematical fact!
I bought one or two days before the cship at $6. It was right after someone (Paulson?) had publicly assured the world that FnF were in sound financial condition. I'v held since out of anger, hope, denial, fear, embarrassment, patience, vengeance, spite, desperation, etc. etc. etc.
cap, you seem too smart to actually believe your own statement that it is a mathematical fact that holders of commons will be disappointed. If you've read my posts, you'll know I'm long pre-cship but not optimistic. Having said that, there are likely hundreds if not thousands of incredibly sophisticated investors/analyst who's collective opinion says the stock is worth $2+ a share right now. So if you were directing you comment to those like me who got suckered into buying at $6 with the "everything is good with FnF" statement just days before cship, then you MIGHT be right, but that's still no mathematical fact - unless you subscribe to the Kellyanne Con-way school of alternative facts. cheers, shadow
Has anyone posted anything substantive on the release of the 11K docs? I've been gone for a few days and might have missed it. Based on the pps, I would assume that nothing of interest has come to light publicly. Obit, have you seen anything? (and TIA).
BTW, I still don't think any major player will saying anything about the fate of shareholders and/or stopping the NWS until they have cover from a favorable court ruling. Cheers, shadow
except Christine and Giuliani ... thought they might be justifiable exceptions
- No one in congress or administration will mention the possible fate of shareholders in advance as, whether positive or negative, that would be just a bad as Corker's comment to short FnF.
- Don't confuse recap, release, reform, etc. with favorable shareholder outcome. The continuing existence of FnF is a completely separate issue from the continued existence of existing shareholders.
- Totally screwing existing shareholders will absolutely not stop new shareholders from recapping the companies. One person's loss is another's gain as has been the case throughout human history.
- The best legal efforts have been mostly defeated in the courts and the best legal advisers for P's have been wrong - so far. What should be obvious from both a legal and common sense perspective has been anything such. Significant legal uncertainty + congressional uncertainty + administration uncertainty = current pps
With 50K pre-cship common shares, I hope this works out but, to be honest, I am also preparing to learn one day that the first thing common shareholders will hear is the sound of their shares getting flushed down the toilet (if you get my gist). glta
Sogo, while not a popular scenario on this board, I agree that congress could be hell bent on a wind down - and they could get away with it if there are no court decisions that force another outcome. The bigger obstacle that I see is that a wind-down would make the warrants worthless along with the common - but put corrupt wall street bankers and congressmen together and I'm sure they could find a way around that as well. Still hoping the 11K docs have SOMETHING of use in them and/or that we finally get one major favorable court ruling. glty shadow
And the status of the 11K docs is?????
Am I correct in remembering that the release of the discovery docs to the P's started April 17 ... and does anyone know if/when any of those will be made public? Just curious if that partly explains pps move.
Obit?
Bueller? ... BUELLER?!? ...
Already 16T in debt, and now the GOP wants to:
- give $600B - $800B in tax reductions to the 1% in health care reform
- give $???B or $?T in tax reform to 1%
- give $???B or $?T in tax reform to corporations
- spend up to $1T for infrastructure
Offset by:
- new taxes on the poor ... or middle class?
- border tax (that consumers WILL pay)?
- cut non-discretionary spending (excluding military? sure, that should work wonders for job creation!
- trickle down economic growth? good luck finding ANY non-partisan research supporting that - and you can look at the tax cut/trickle down fiasco playing out in Kansas RIGHT NOW
- repatriate foreign earnings? looks great on paper but, oops, its a tax increase on the 1% ... oh, never mind
- strip all earnings from the GSEs and then monetized 80% of all future profits with the warrants? Ladies and gents, we have a WINNER!!!
Ok, anyone still think that the gov't won't do everything the courts will let them do to maximize their stake in FnF? Folks, POLITICIANS ALWAYS SPEND OPM (Other People's Money). That's how they get elected. GO TEAM PLAINTIFF'S
First, IF IF IF the NWS gets stopped or reversed (possible, if unlikely) wouldn't that put the warrants in full play under your rationale? Also, even if the NWS is not stopped, that is a takings issue, not an ownership issue. So the gov't could stop the NWS when they decide to exercise/sell the warrants. That way they still manage to take the excess dividends during the NWS, then end it when they are ready to boost the value of the enterprises as they cash in on the warrants. I agree that all sounds pretty convoluted, but my point is that if the gov't wants it all, they have shown they can do it under the essentially unlimited powers granted by HERA. Again, there may be a takings claim buried in the whole mess, but who knows what if any real compensation that will provide current shareholders.
MOST IMPORTANTLY ... For everyone who continues to think "well, the gov't can't or won't do that", just ask yourself - who would have EVER thought the gov't could do what they have ALREADY done? Declare cship, force out the board (and brag about how they did it), sign PSPA with 10% rate and 80% warrants, pass HERA with the (hopefully) unconstitutional anti-injunction clause and the infamous use of "may" to redefine conservator duties, sign the NWS because of the death spiral, declare 11,000 docs as privileged, etc, etc., etc. Honestly, the gov't WILL do whatever they want ... and the courts MIGHT enforce the rule of law. Yes, FnF might survive and even prosper, but that doesn't ensure anything for current shareholder. Just look at the last 4+ years. So I still hold my 50K $6/sh. pre-cship shares as I learn a very costly civics lesson about the power of wall street, the corruption of our own elected officials and the razor thin line between the rule of law and a banana republic. If nothing else, my kids will not have to learn this the hard way. shadow
rek, if exercising the warrants is impossible, then why did the price crash (and stay down) when the cship was announced 4 years before the sweep? Sorry, but as smart as I think you are, and I think you are very smart, I have to defer to the thousands of even smarter professional market participants who say the warrants took tremendous value from the shareholders when they were issued. As advance news of the cship was leaked by Hank et al, the share price dropped from around $60 to under a $1. A lot of somebodies besides me think the warrants can be exercised. BTW, as we have painfully learned through this nightmare, and as I saw in my public CFO days, there are many, many ways to get around laws, regulations, etc., especially when you are the government. BTW, even though we have different opinions, I totally enjoy your post and appreciate how they force me to keep evaluating my perspective. cheers, shadow
rek, all of your objections assume the gov't will own the shares, but I don't expect that at all. Rather, they will either sell their ownership rights to others or simultaneously exercise and sell the shares. I worked as the CFO for public companies for 15 years and saw that happen every week in every industry. Its just the way corporate finance works. Re the 5x multiplier, you are totally correct - my fat finger hit 5, but it is actually less than 2x as you state.
Ok, it looks like we really disagree on the exercise of the warrants. The cancelled warrants would be a 5X multiplier. BTW, what makes you think the gov't won't exercise the warrants (and apologies if you have explained that before)?
Not with warrants and recap dilution
Actually, I would think that the holders of the warrants would care a lot about shareholders. The only scenario I can think of where that would NOT be the case is if the NWS can't be stopped and reversed - in which case, if the gov't is satisfied with what they took from current shareholders, they might let the warrants become worthless in a receivership and then pass on the golden goose to the TBTF crowd. I think that is a real stretch, and it doesn't resolve the lawsuits, so in the end the gov't might be the only ones who give a darn about shareholders (though we still lose 80% of our investment + the recap dilution).
Without pressure from a court decision (or the discovery docs), I don't see anything that truly pressures the gov't to take action. FnF are already in cship, their capital is already way below prudent levels and the market knows the gov't backstop is in place if another draw is needed. If those factors were not enough to already force action, what difference would another draw make, especially as the gov't has both the NWS and warrants to protect their "investment" on behalf of tax payers? And, unfortunately, there may be factions that want another draw to force an outcome that preserves FnF while wiping out shareholders.
BTW, for anyone thinking the warrants won't be exercised, if we're having this much difficulty stopping what should be a blatant taking under the NWS, can you imagine the size of the smoking gun that would be needed to reverse the warrants! I hope there is a death star hiding under the capitol dome ...
cb, great post, really. It highlights the fact that, if the warrants are exercised, ending the NWS is only a 20% victory - and then common will get crushed again on the recap dilution. The real taking occurred with the original PSPA and the 10% rate and the 80% warrants. NOBODY else got punished like that. Now, if most of Ps have a cost basis below $1, and we assume the gov't wants to maximizes the value of FnF and their warrants (knowing that they will be impacted by the recap dilution as well), then a deal that gets the ROI high enough for the low basis Ps might just be enough to stop the suits. The fact that all other shareholders had 80% of their value taken will be chalked up to collateral damage of the Great Recession (and that we should be grateful to get anything!)
Very few of the big players ever mention the fate of shareholders. I feel like everyone, including the administration, is waiting to see if there will be any successful challenge to the NWS before committing to a side ... and/or they don't want to reveal their hand for fear of inviting the wrath of FnF opponents or, alternatively, their WS buddies who are shareholders.
Some say the courts have become moot. I say they still hold most if not all of the cards because no one wants to act to only be contradicted by the courts. Even if we get to the point of needing a draw, I don't think that will force anyone's hand - they'll just say "we're still working on reform" as they have for the past 7 years, the PSPA liability will just gets larger - and we'll all wait to see where courts (and discovery docs) take us. cheers, shadow
"you can be afraid of yer shadow" ... touche! shadow
Price should go up ... but what IF the NWS is NOT stopped? I read in detail ALL of the filings and have learned that for every seemingly bullet proof filing by the Ps, the Ds filings read just as convincing - and, so far, the courts have sided with the Ds. I also think our negotiation position is rapidly deteriorating with every court loss and each day we get closer to needing another draw (= failed business model BS from opponents). Since it seems that the court cases can be delayed almost indefinitely, my only real hope right now is that the discovery docs provide what we need to destroy the false narrative, stop the sweep and put and end to this BS. Thanks for all of you posts and good luck. shadow
navy, I agree that FnF may not be shutdown, but what makes you so confident that current shareholders won't still be royally screwed by no return of NWS funds, warrants exercise and recap dilution? TIA shadow
I find it interesting that many people seem to automatically equate comments about reform + tax payer protection with good news for current shareholders. FnF could be totally reformed, and tax payers protected, while current shareholders get (further) screwed. How? Well, one obvious scenario is that we never get any of the excess dividends back that were taken during the NWS, we get diluted 80% with the exercise of the warrants, and then diluted significantly AGAIN when NEW shareholders are brought in for the recap. Unless we get a favorable court ruling and/or a smoking gun, - no, make that a bazooka - is found in the discovery docs, we are not going to come out well on this. Also, if FnF are reformed with appropriate capital requirements, NEW shareholders will jump at the chance to provide the capital at bargain basement prices (at our expense, of course). Go TEAM Collins/Pagliara/Steele/Discovery!
Unfortunately, I feel the same way - which is not very popular on this board. When I read in detail the various filings by Ps and Ds, I see many, many ways the Ds can either win outright or delay this forever. Unless there is a smoking gun in the discovery docs, it may be years, if ever, before we would see any justice. Yes, a miracle could happen, but that's a worse investment strategy than hope! I will hold my 50k pre-cship shares until the fat lady sings. glta
Yes, you are correct. I usually don't reply to blatant dumpers, or pumpers, but their complete reversal and "I know something you don't know" got the better of me! Appreciate the perspective and good luck if you are a long. shadow
"I have many facts to support these claims too numerous to mention here but any reasonable mind would hard pressed to disagree."
You've written extensive negative comments here for months (at least) and now you can't even share one of your innumerable reasons we'll be at 10 this time next year?
just want to clarify, I said "where the 1% get essentially all of the benefits" ... well, at least I know you are human now!
Yes, but I think the lost revenue from the tax reform the R's are talking about (where the 1% get essentially all of the benefits) will run into the reality of a problematic border tax and the added outlays for infrastructure. Between health care reform, tax reform, new border taxes and infrastructure spending, something BIG has got to give - otherwise, the deficits we've been running will look like a brownie sale in comparison. Even the FnF piggy bank is not big enough to balance the books (regardless of shareholders' rights)
I agree with everyone that r-ship is unlikely, as law suits would likely continue for a very long time, however, depending on how badly the decision makers want to hurt us and/or reward TBTF banks, they could definitely use the threat of rship, and public perception, to totally crush us in a settlement.
FWIW, in a rship, all liabilities AND assets go to the new owners, so assuming the gov't doesn't own more than 80% of the new entity (which seems very unlikely), the liabilities do not show up on the gov't book.
Again, I don't think rship will happen, but I do think the threat of it is a very potent weapon.
I really hope there is some good stuff in those 11 docs ...
If capital goes to zero and then they need a draw, the gov't could declare the companies insolvent again and move to receivership. Of course, that should wipe out all shareholders, making the warrants worthless as well. So if the NWS has not been stopped and the gov't is satisfied with how much they swept, they could declare r-ship and recapitalize with brand new shareholder (TBTF banks?) who would get the deal of a life time.
Not saying that will happen, but if the NWS can't be stopped some how, it'g going to get dicey.