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For preferreds. Certainly not commons. You'll be wiped out.
The AIG case was not a win for the shareholders unless you believe receiving nothing was a win.
You've never read a 10-k, have you.
First of all, Fannie has 5.8b shares outstanding because of warrants owned by the Treasury. Secondly, there's absolutely no question that the companies will have to be recapped before released. Every bill proposed to Congress has included that fact as well as the former CFO Tim Howard and every other intelligent investor in the world. It is an impossibility that this company won't be recapped which will require an amazing amount of shares. $20 per share is a pipe dream shared only by those who have no idea what they're talking about or how to calculate basic math.
Only if you value the company at $300b (28x earnings).
Correct me if I am mistaken, but I do not believe we are talking about chapter 11 here. In fact, I don't see how we can ever be talking chapter 11 until AFTER we have been recapped and released (since the rationale for the NWS was that "in exchange, we will be here to backstop your securities in an economic downturn"). Try defending THAT in court when that assertion is on paper.
I am not talking about right and wrong. I am addressing your assertion that part of the reason that the value of FNMA shares will not exceed $10.00 is that the warrants will be fully exercised.
My point is that you cannot reasonably do both. You cannot execute warrants that rob, dilute or whatever verb you want too use, current and prior shareholders of 80% of their ownership, and reasonably expect to sell enough new shares to generate the needed capital. Investors are not stupid and they do not live in a vaccum. They will see how you have taken value from existing shareholders and have little or no appetite to purchase the new shares that you offer.
The only dilution that will be palatable to potential new shareholders will be dilution that benefits current shareholders. Now we can have a cogent argument about how much dilution can be billed as necessary to recap the company, but the answer to that question is DEFINITELY NOT maximum possible dilution.
Doesn't seem right but they have the power to do so, unfortunately.
He has lost half. His total assets under management was $19b. It's now $10.73b. That's nearly half.
Prove it. Let's see your math. This should be entertaining.
He has. Apparently you just read bits and pieces of his website. Try reading all of it. The math is simple. If you don't understand it, I don't know what to tell you.
Pick up a newspaper. He lost over 20% in 2014, 2015, and 2016. Do you know how to search the SEC website for FREE and accurate information? If not, I suggest you learn.
That's Tim Howard's explanation and it's correct. It's not a valuation though and he never wrote it to be a valuation. What he doesn't account for is recap and warrants. Add those two in and the result is a $10 stock price.
$10.6b * 14.62PE = $155b market cap.
Shares outstanding (includ. warrants) = 5.89b
$77b recap requirement requires the issuance of 7.7b additional shares at $10 per share to equal a $155b market valuation for a company that produces $10.6b in earnings.
(13.6b * $10) + $19b preferreds = $155b market cap.
Normalized earnings * cyclically adjusted PE = Market capitalization. After adjusting for recap and warrants, market cap / new shares outstanding = fair value. The answer is $10. Now go work on the math.
Ackman's valuation is over three years old and based on old information. His recap scenario involves a 10 year plan before the entities are even released back to shareholders. He also has lost half his clients money in the last three years which is why several are leaving his fund. Highly doubt he stays in business longer than two more years. Most people who go from $19b AUM to $9b rarely stay in business.
The math is easy. All you have to do is think about it.
It's an extremely easy mathematical determination. It will be no greater than $10 per share.
$10 per share at the most.
I never said anything remotely close to what you are claiming. It's clear you rely on deception.
I never said anything of the sort.
Millstein isn't a billionaire.
What are you talking about?
They will if there government backstop's them. Sounds to me like Buffett's goal.
"Seriously - to note any other preference and to suggest a bond like quality to preferred stock is wrong"
Yeah, Berkowitz, Paulson, & Perry have it all wrong. No difference between preferred and common. Got ya. Goodluck. Lol.
Lol. Goodluck kiddo.
If you don't think institutions like Wells Fargo with a $290b market cap, for example, couldn't step up to the plate, you have no clue about the banking industry and how the Fed disperses Greenbacks.
Dream on, youngblood. Finish school.
Currently, the Fed owns more business because they purchased (stole) it from the GSE's over the last several years.
Ultimately, Buffett's right. They can be replaced rather quickly. However, the fact that they haven't been is still important.
More concerning: no proper payment for taking of private property. I still believe in the rule of law.
According to that scenario, that is correct. Because of the Perry case, which recognized liquidation preference for the jr's, they still have a dog in this fight. Very well could be that commons do to, but no legalese has addressed the commons thusfar; which is why the commons are "more" speculative than the preferreds.
Again, nobody knows. Unfortunately, it's still too early. We know Mnuchin's intention. But it's a vague intention at best. If bonds weren't selling for $47 above par, that's where I'd be.
All bond holders are listed as liabilities on the balance sheet. As long as tangible assets (which all of the GSE's assets are) exceed liabilities, what's leftover is applied 100% to preferreds. Currently that amount is $6b. To make par on all preferreds requires $19b. So there's a shortfall. However, commons would equal $0 in a liquidation such as this.
I haven't broken down the preferreds beyond that. Some are $50, some $25, and some are $100,000. Quick and dirty can be calculated as $6b / $19b = 31.5%. So if you own a $25 par, for example, you'd recieve $7.88 per share; which isn't far off from where $25 pars are currently trading. Again, in the scenario we're talking about, commons would get nothing.
$19b worth.
The value of Fannie is $150b based on a 6.8% WACC. The incentive is the recap required to fund the company. That may be reason enough. The preferreds aren't exposed to the market cap of the company, only common's are. Doesn't matter if the market cap is $250b or $0. As long as equity is positive, the companies liquidation value is sufficient to provide at least a portion to the preferreds, whereas that does not exist for the commons.
I was specific, at least I tried to be. It is absolutely possible for a company who was once public and became private to re-apply to be public through an IPO. That, however, is not the matter I was addressing. Bankruptcy does not automatically create a private entity out of a public one. You are clearly talking about two completely different matters. GM went from public to private and back to public in the example you supplied. A completely different matter than what I spoke of.
A public company, that remains public, cannot IPO more than once. Now, I was very clear about that from the beginning and I won't address the subject any further beyond what I already have. When you're in a position to manage a $34m partnership that you built from scratch from a thousand dollar bill, you get back to me, slick.
"If commons go down then so would jr prfd."
Preferreds have liquidation preference (established through contract law). They are more of a bond than they are a stock which is why they're classified as "preferred".
In a heart beat.
General Motors has never IPO'd multiple times. It really is amazing that a few of you don't even know what an IPO is.
No sir, you can't. The company has to have a characteristic of change. For example: a spin-off.
It wouldn't be another IPO (you can't IPO the same company twice). It would be an issuance of new shares, which 80% of chapter 11's that re-emerge from bankruptcy engage in. Not saying this WILL occur. I certainly don't own a crystal ball that feeds me that information. Just saying it's a very real possibility and one to think about and possibly incorporate into your thesis. It's the reason I swapped my commons for preferreds since the last time I was here.
But don't you think the lawsuits would be huge trying to BK companies that just made 12B each? Understand that it still could happen? Also..how would they get new $ coming in after they screw existing shareholders on companies that are profitable?
I believe, unfortunately, that receivership (which is very similar to a chapter 11 BK) could be an option they're looking at; as much as I'd not like to admit it. There's no doubt in my mind that Mnuchin wants to restructure them, as he's made known, it's just HOW he wants to restructure them that concerns me. Receivership would wipe the commons. Preferreds would have liquidation rights which shelter them from the same catastrophe.