Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Good luck with that. It helps with denial.
Not at all. Publicly traded companies can dilute at will. They can take on more debt. They can go bankrupt and extinguish all existing common shareholders and convert their debt into new commons.
You have to get your head around the fact that any exit from conservatorship within the next 20+ years will look like a Chapter 11 Reorganization. Conversion (or write down) is the best thing that could happen.....or else you'll be looking at this message board for decades to come.
At a 3% rule, a release could happen immediately. I have little doubt the market would put an Enterprise Value on Fannie and Freddie that would more than cover the capital shortfall. 4.5%, not so much.
I firmly believe Thompson's move is to put Treasury more in the money, which will lead to a release sooner rather than later. Treasury has no other way to profit. TINA.
That's a nice opinion and I have my own as well.
The reason why the senior's liquidation preference is increasing dollar for dollar is so that the government can still hold all the cards and dilute common into oblivion. It matters not about their warrants, it matters what their total ownership interests are at the time of a re-ipo. The juniors are as good as gold...as they stand between the government and the re-ipo, which is the only way the government will be able to reap more profits from this fiasco. You have to realize that the government stands to gain absolutely nothing by waiting until the end of time to exit....because they aren't sweeping any profits or dividends.
Oh yeah, Mr Bombshell himself. Negotiating with hashtags. LMAO.
In my opinion Alibaba is not nearly as good a comparison as Petrobras. Petrobras managed to raise $70B, and the Brazilian government retained control of the company afterward. If they could raise $70B, I think FnF could easily raise over $100B.
Yes, a senior-to-common conversion would render the warrants worthless. The two main reasons for Treasury to convert the seniors to commons rather than cancel them is to gain more value for the taxpayer (99.9% > 79.9% after all), and to leave less value for the "evil hedge funds".
(Whether or not that last characterization is accurate doesn't matter. It will be talked about as if it were.)
The capital raise will need to happen alongside release from conservatorship. The government won't want to release FnF while they are significantly undercapitalized, and new investors won't buy shares in companies they have no control over. Simultaneity is the only solution here.
I think it's exactly the opposite. TINA (There Is No Alternative) is my primary investment thesis for FnF, and a consequence is that the junior pref shareholders will have to be dealt with (i.e. offered at the very least a significant percentage of par) to accomplish release from conservatorship. By contrast, the senior-to-common conversion possibility shows that FnF can be recapped and released while the existing common get crushed at the same time. It's the commons who are much more dependent on a court victory that either kills the seniors (Collins) or gets $125B returned to the companies (USCFC cases).
Some food for thought: Treasury could convert the seniors to convertible non-cumulative prefs with a total par value of $193B, a dividend rate of zero, and a mandatory conversion to common at a pre-determined rate upon sale to anyone else. This raises core capital by $193B (the same as cancelling the seniors or converting them to commons), gives Treasury no incentive to hold the shares (due to the zero dividend), and lets investors buy the shares at their own pace. It basically gives Treasury as many (pre-capital raise) common shares as they want (probably 1T or more pre-reverse split) while never giving Treasury ownership of any common shares at all. This avoids voting rights problems as well as any potential forced balance sheet consolidation.
Agree on all points. With the news of reduced capital requirements....I think this is Treasury's doing. They are in the same boat as we are until release...just a waiting game for decades unless the cap requirements are changed. So they will be. This will put the warrants well in the money...and this also gives them room to create that scenario that crushes equity and it's Treasury that gets the big windfall. I can also see a scenario whereby a release moots or all but moots the outstanding lawsuits.
As you noted above a senior to common conversion would render the warrants worthless, but let us not forget the warrants are worthless as it stands right now. I expect some tricky accounting in a recap/release.
Furthermore, Biden needs a win. They would spin this into some kind of great accomplishment of government intervention.
In summary, TINA. If Collins accomplished anything, I think it put this on a path to release.
I own a good bit of Petrobas. The Brazilian government does a lot better job of running companies than Treasury and FHFA.
Of course they can exercise the warrants and yes, they did.
In his ass
I didn't say it was a bankruptcy, I said when this is released it will be analogous to a BK re-org, and the gerrymandering to get this released will be analogous to a bankruptcy plan.
You can jump up and down all you want but the fact is that the government is running the show and has been all along.
Since there is no opportunity to cash in with the status quo, the government will look for a way to reap further rewards. And the way to do that is with conversion to warrants, super warrants and commons. JPSs will likely be unaffected. And the reason why they will be unaffected is because it would bring about a new round of lawsuits.....just as converting the conservatorship to a receivership would do.
And of course this is political. Biden will want to cement some rules, which will be more lax than under a republican administration, so the time is really now.
I have an idea....I've been listening to the turds in the government. That's why I own millions in JPS. Furthermore, I have an extensive background in bankruptcies and a lot of what will happen to get this moving out of conservatorship is analogous to BK re-orgs. Treasury is stuck. If they want to reap any more profits they will have to voluntarily convert.
Coherently huh? Sometimes the obvious is in plain sight but you just don't want to hear it. I seriously doubt Treasury will let the lawsuits dictate the release from conservatorship. They have absolutely no upside right now to remain status quo. Voluntary conversion effectively moots all JPS related lawsuits and any direct claims issues can be settled or mooted for a little of nothing in the big picture.
You should read this again:
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=165220548
When the capital requirements are met, it will have been after the Seniors (some) are converted into commons and the warrants have been exercised. How much existing commons 'soars' from a point of maximum dilution is anyone's guess, but it won't be what you think it is. There will be voluntary conversion of the seniors by Treasury, followed by dilution, followed by issuance of new warrants in the post-ipo company and somewhere in there will be a reverse split.
There won't be any back dividends on non-cumulative preferreds. That's what 'non-cumulative' means.
But I'd be happy with face on my $25s or $50s. Or even a reasonable haircut.
A haircut of JPS doesn't bode well for commons though.
So whenever you bash JPS just remember you're basically zeroing commons.
That's reality.
JPS have 12-13x upside from here. Does anyone honestly think commons have that kind of upside? 18 bucks? really?
It's no use. Let him live in fantasy land.
I really don't care about your hypothetical because it's been happening for 13 years.
And your point is?
They didn't have to pay a dividend before they were taken over by the government.
And your point is?
Whatever point your are trying to make, just remember this one thing....commons are last in line for anything.
Remember AIG? The government loaned AIG (to fund bank bailouts) $182B and took 79.9% of AIG's equity. Sound familiar?
Treasury and the Fed made $23B profit combined over 5 years for the bailouts.
https://www.thebalance.com/aig-bailout-cost-timeline-bonuses-causes-effects-3305693
https://www.treasury.gov/press-center/press-releases/Pages/tg1796.aspx
Who gets paid first is the most important thing. Right now, it's the government. You should ask yourself whether or not the government will decide they've stolen enough and is ready to put this back into the hands of private ownership.
5 years won't matter if the SPS liquidation preference keeps going up dollar for dollar of retained earnings.
The government has to make a choice. It's either defacto nationalization, i.e. the status quo, or they take a haircut on their SPS to release the GSEs from conservatorship, or lastly they don't take a haircut and this goes into receivership, which will result in a slew of new lawsuits because shareholders actually have some rights in receivership.
There's no need to. Thanks for zapping my post within seconds of me posting it....all it had to do with was the state of affairs as they are now and what they need to be in order for JPS or Commons to see a penny.
You should look up 'liquidation rights' for the JPS and liquidation rights for commons. Hint, you won't find any for commons.
I've been in the distressed investing game for well over a decade...as well as a lot of bankruptcy experience, so you can trash what I say if you want, but you're doing yourself a disservice.
Preferreds will see a return before commons, that's just how the law and contracts work.
Right now neither are in the money. I own $5M JPS.
Commons and warrants are aligned, in that they are the last to get paid.
Preferreds will see a payout before commons and there's no other way around it.
The question is, "what is the company worth". That is called the Enterprise Value.
All your other gibberish is just that, gibberish.
You need to learn what a waterfall analysis is, what priority means when it comes to payout, and what enterprise value means.
If you figure out EV, then you will know what the commons are worth.
EV is everything.
And you can bet your ass the government will take 79.9% of anything over and above the liquidation preferences of the seniors and juniors combined.
The seniors definitely aren't going away....that is until either they are paid in full via a public recapitalization or, if the Enterprise Value of FNMA is less than the liquidation preference of the seniors, then there will be some type of senior to common conversion (a portion of seniors to common).
Just like a Chapter 11 reorganization.
It all comes down to Enterprise Value.
You're right, for all intents and purposes, this is a bankruptcy.
Therefore, it would be prudent to determine the Enterprise Value of the company now.....so as to see where the waterfall takes us.
It's going to take a 9-10X multiple to get the junior preferreds in the money, imo.
And at make whole for the junior preferreds (face, not face plus interest because it ain't gonna happen) 79.9% will go to the government.
Mr. Mooppan's statement isn't gospel....if any of his opinions were, then you may as well pack your bags and write this off.
It will be the SC that decides a remedy, not Mr. Mooppan or Treasury.
If the SC says the NWS is subject to ratification, that's how it is. If Calabria gives Treasury the middle finger, that's also how it is.
If Calabria says NWS is water under the bridge, that's the other side of this equation.
Because Treasury's signing on the NWS was constitutional....as opposed to FHFA's signing.
Treasury doesn't have any say so in a ratification scenario. If the SC rules that Calabria has the option to ratify the NWS as the constitutional remedy fix, then the decision is solely his.
No. The only thing the shareholders want vacated is the constitutional remedy (or lack thereof) by the 5th. What I am saying is that SCOTUS may vacate and just punt to Calabria for ratification.
Furthermore I said it is highly highly unlikely SCOTUS would provide a remedy on the APA claim.
Here is the requested relief:
The Court should affirm the Fifth Circuit’s statutory ruling and its ruling that FHFA is unconstitutionally structured. It should reverse the Fifth Circuit’s ruling on the appropriate remedy for Plaintiffs’
constitutional claim and order that the Third Amendment be set aside.
And I only addressed the Constitution claim, just as was in your reply I quoted.
I expect them to punt when it comes to remedy on the constitutional claim. I'm 90% confident they'll punt on the APA with regards to a remedy and affirm the 5th.
And that guy is an idiot. You only get the 28 cents/share and the CVR's if you owned the stock on July 2.
Now if you did own it on July 2nd, which means you had to buy it no later than June 30th, then you can now sell it and still get the 28 cents according to the Plan.
In summary, if you are buying it now....you're an idiot...and if you owned it July 2 and haven't sold it by now....you're also an idiot.
BK Plan filed. Shares get ZERO. Sell while you can.