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Unless SCOTUS says “everything” needs to be unwound, another legal avenue may need to be pursued. More analysis needs to be done on the warrants. In principal I agree they should be cancelled with the SPSA. In reality, according to ACG, it’s the grease that allows the Big Bang to happen.
I haven’t seen a good answer on the warrants ... PSPA amendment, consent decree, CRP, MS & JPM negotiating JPS conversion in the relative distant future, etc., I’ve seen good, plausible answers.
On the warrants I haven’t seen a good, compelling answer yet.
Let’s see what happens over the next 40 days. Then pass judgement ... curious how these posts are popping up so close to all the buzz that something is in the works.
If nothing is done before inauguration I’ll be throwing the lot of them under the bus ... but what a waste of work and opportunity it would have been ...
I agree on the warrants but the question is how? ACG believes they will stay in place, I believe amended terms benefiting FnF, and then they will eventually be exercised.
Ackman has said it incentivizes the Gov to raise the price and ACG is stating the same. ACG says the warrants would go to the Biden administration.
Just repeating what Ackman said in the cap rule commentary (can be found near the end of “his” commentary). See Gaby recent interview and David Metzner tweet.
I don’t think the warrants are that big enough of a deal considering I’m expecting some dilution, but still an eventual shareprice over the next 3 to 5 years of $30 to $60 per share. If you expect warrants to be cancelled and retained earnings only, then $200 per share estimates are in play in 3 to 6 years.
I’m putting out various scenarios.
Interesting times ...
I like it - and the raise for fannie would be 25$ billion maybe ... but then the question is why raise when u could retain for another 2 yrs? That’s far off ... just need the big bang and uncertainty will have been removed and we shuld be able to get to the NYSE. Once that has happened we will have cleared the tower and jps bashers will be gone ...
Brooge, that’s for Fannie only or both? Is that regulatory capital or buffer capital also?
I get the vibe retained earnings will be at least 50% of the capital raise. Could be all of it also. I agree with TRCPA that a public offering here and there may be done to raise additional capital. Even $30 billion combined cap raise for Fannie could be done in a couple ways. I’ve always said 4 to 5 billion share dilution with $15 to $20 billion in annual earnings for Fannie still gets you to between $30 and $60 bucks per share with a P/E of 10 to 15.
None of the above considers a favorable SCOTUS ruling. If we can get the PSPA and Consent Decree, pop to around 10$, get NYSE relist relatively quickly, we will get new price targets and knowledge that the duopoly is back in the largest real estate market in the world = $11 Trillion, where FnF underwrites about $6.6 Trillion.
Get to the NYSE via the big bang and we’ll never have to deal jps bashers again ...
He can call 1 800 TRUCKER ...
I will add again that Mnuchin said a long time to raise capital even under a consent decree. Time lines have shifted out on ACG’s timeline. It feels like retained earnings will definitely be a significant part of the capital restoration plan.
We need the big bang to get us on the NYSE and then new hedge fund analysis and coverage will begin with real analysts from the largest investment firms.
I should add that Gaby says FnF will be relisted onto the NYSE as institutional investors do not have internal charters to purchase securities on the OTC exchanges. So that would be coming also ...
One clarification on the prior post: the one scenario of a Biden win had the PSPA be amended (deemed paid and NWS xled) but no consent decree. The PSPA amendment alone, according to Gaby, would almost guarantee that FnF would only raise capital via retained and would be very good for commons.
I’m getting a vibe retained earnings is the path. Mnuchin said a long time to raise capital ... it feels like JPS are getting boxed in ... I guarantee Paulson knows exactly what is happening...
Thanks, Rick. Just finished watching Gaby from ACG about 45 days ago.
The 4th amendment according to ACG is writing off the PSPA as paid and cancelling the NWS.
According to ACG the warrants are in play although per Gaby they would be used by a Biden administration.
I know ACG gave an update recently within the past two weeks and the timeline was extended out ... I would be interested to know what was said during that update.
Gaby confirmed the longer the retention period for capital the better commons do.
Gaby also stated that JPS conversion is a separate issue than the PSPA amendment and consent decree. She said negotiating with JPS will be done by Morgan Stanley and JPMorgan at the appropriate time, with the implication that FnF’s financial advisers will be running the capital raise effort.
So JPS conversion would not be part of the Big Bang that everyone talks about. The Big Bang relates to PSPA 4th amendment (deemed paid and NWS cancellation) and Consent Decree. A Capital Restoration Plan would follow and at least, according to the ACG timeline, a 4 to 5 year tail to raising capital. Exiting conservatorship has a time window according to ACG from mid-2023 to jan-2025.
45 days ago Gaby stated several times she felt there could be a settlement before SCOTUS Dec 9th. We will see this week and I know there was an update over the past two weeks.
The scenario above was the most likely if Biden won the election and he did. There were roughly 5 scenarios if Biden won. One interesting scenario was the PSPA amendment (both items) but consent decree. Gaby says commons do very well under that circumstance as FnF can retain earnings but probably no equity raise.
Mnuchin and Calabria have to agree to a consent decree. Has all the public bs been done at the hands of funds who want cheap shares or is this politically motivated... politically motivated is worth the digital paper it’s written on, which is nothing ... go where the money is ...
Let’s see what happens this week ...
Rick, do you have a link? Or can you tell me where I can search for it?
Tim Howard doesn’t explain why he believes consent decree is hardest. Mnuchin just brought consent decree (order) up as the only scenario ... Tim Howard ... at least explain your positions ... very bizarre posting from ROLG and Tim Howard as of late ...
Haha ...
Rob, if there is a SCOTUS settlement before Dec 9, the 5th circuit would stand and allow Biden to make the motion to dismiss Calabria at will. Of course, Calabria could appeal Biden’s demand to the supreme court via some avenue.
Given Remedy may be mooted, SCOTUS would only entertain the for cause topic. Since Seila already addressed this issue, SCOTUS could easily deny the appeal and Calabria would be dismissed at the will of Biden.
This could all take roughly 6 montha to 18 months to play out. Who knows if Calabria wants that.
Personally, I think SCOTUS accepted the case and will run with all issues and decide them regardless of a settlement.
Fence, if SCOTUS does not opine on the for cause issue, Calabria can appeal the 5th circuit again, buying him maybe another 6 months to a year, before scotus decides to accept the appeal. If remedy becomes moot, then scotus may denial the appeal, say see Seila, and uphold the 5th circuit.
Not as far fetched as you may think
Remember both Mnuchin and Powell’s original reaction to Calabria’s rule was not positive ... what happened behind closed doors where FSOC came up with a very superficial review - 4 pages only? Ha!
If there is a settlement before Dec 9 that is a Trump strategy committee (lots of lawyers) decision. I don’t think there will be but would be pleasantly surprised if there was.
Maybe a settlement after Dec 9th so the FHFA director can be fired at will so when the next republican President is elected they can install who they want. A republican strategy could be to allow Calabria to be dismissed ... If Calabria were to be given job security vis a vis a legal settlement, then just when the 2024 election was upon us, Biden could appoint someone for the next 4 years.
Of course a new legal challenge could be made but who knows what the composition of the court will be.
Who knows? To many variations to deal with right now ... need some variables removed ...
ROLG IMO is a bit too focused ...
You can’t isolate Mnuchin and Calabria in a vacuum. Trump is on a spree appointing his benefactors to various positions. He also has Ackman, Paulson, et al, to help for their campaign monetary support.
I highly doubt there is a personal issue preventing how this proceeds. Mnuchin has an army of attorneys ... I think the PSPA amendment and consent decree are imminent.
I don’t think Mnuchin in good conscience can write a substantial check to FnF without having legal support in that decision. Marking the PSPA as paid he can do ... I don’t think Mnuchin cares about keeping Calabria in the FHFA. If Trump wants it done it will be done ...
If Calabria wanted an audience with Trump, I’m sure he (admin made a call or sent a letter) spoke with Trump’s chief of staff to get on the agenda so he, or the chief of staff, could convey Calabria’s plan. Mnuchin certainly has more interactions with Trump and they have a plan for certain.
Again, the assumption is the PSPA being paid and consent decree. Crapo has basically confirmed it ...
ROLG thinks the gov cares about damages. They definitely don’t now that a Biden admin will inherit the risk - a little surprised at his post ... always big picture, never get caught in the weeds ...
Holden - WaFed was dismissed by Sweeney because she felt the remedy sought in Fairholme was suffucient to satisfy WaFed’s claims for relief.
Breath ...
BTW: Re FNMFO ... up 15% ... what was the spread on the Bid/Ask?
We finished green ... good ole OTC
So if Calabria is confident he will be gone, the consent decree can be amended by a new FHFA director providing FnF agree to the amendment, e.g., cap rule coming back down.
Before Jan 20th, Consent Decree requires a Capital Restoration Plan (CRP), and the CRP requires the PSPA to essentially be deemed repaid. If the plan all along was to have SCOTUS rule against the Gov - obviously there is no appetite to defend the FHFA or NWS by the Gov - then the CRP should have a long enough tail to allow for the recovery of monetary damages. Seems a bit far fetched for me ...
So ... I’m not sure much can be done beyond the bare minimum unless Mnuchin wants to allocate significant funds to FnF.
The warrants, as ACG David Metzner believes, acting as “grease” to get the job done could mean anything. Could be a private placement but I would think the window would need to be opened as an auction, etc., meaning public, so I don’t think that can work as I believe the Gov would need to entertain competing bids to avoid any conflicts of interest, etc. All of that would be public knowledge and would allow all parties to know the plan.
Are the warrants needed to amend the PSPA? What does Mnuchin think about the 30% overpayment? How would Mnuchin reconcile the warrants with a $30 billion overpayment? Does he evencare about the overpayment?
Good time to interject Crapo’s statement during the Senate Finance Committee opening statement where he told Mnuchin to do what is necessary and get the job done as the administration sees fit. Given all the partisanship I suspect the minimum will be done - PSPA and Consent Decree.
Further questions on the warrants:
Does the Treasury amend the terms of the warrants by depositing $100 billion into FnF coffers in exchange for the warrants? Doubtful
Does the Treasury auction off the warrants at fair market value, which most likely wouldn’t happen until Yellen is Treasury secretary ... Doubtful
Does FnF agree to pay 10 billion to repurchase the warrants out of future earnings?
Does Mnuchin return the 30% overpayment and deduct a % for the warrants?
There are a tone of moving parts that the gasbags, hackermans, lights, etc are not paid to uncover ... hence Epstein et all.
He’s referring to FNMAS ... look closer ...
Consent Decree ...
Reportedly, per the Hannah Lang, Calabria made the comment he does not know how much longer he will be with the FSOC. So based on that I’m assuming no settlement before Dec 9th.
The bare minimum before Jan 20th is PSPA amendment and Consent Decree. Mnuchin must write off the PSPA. I think that will happen ... That clears the way for Consent Decree and gets us out ...
The next question then relates to the warrants ... There are a bunch of scenarios ...
Then SCOTUS will render their decision ... Next week begins the clock ...
We’ll see ...
Gorsuch would join him per Seila minority opinion. Seila isn’t remotely close to the ultra vires agency act re the NWS that’s in Collins. I bet Kavanaugh, who has already ruled in favor of shareholders, is an easy alliance with Gorsuch and Thomas. I’m assuming behind closed doors ACB was asked about Collins also, so she may be an easy sell.
You’ve got Gorsuch, Kavanaugh, Thomas, and Barret, three of which were appointed by Trump.
Gorsuch and Thomas are on record in Seila that they would’ve liked to have jettisoned the CFPB all together. Kavanaugh has already ruled in favor of FnF shareholders in DC, and Barrett was undoubtedly screened by the Trump admin re Collins. That leaves only one more justice like Alito or Stevens to join that group.
With the NWS problem, and the targeted impact of the FHFA to basically FnF only, it stands to reason they may overhaul the FHFA altogether, and more liberal judges may join the majority given Seila is now the law of the land and remedy may be easier for this court to enforce.
Lastly, per the Epstein CEI forum, the court could render an opinion by Feb at the earliest.
Kris Kringel Capital
@KRINGELCAPITAL
·
20m
Replying to
@HoldenWalker99
Dude there is medication for this...chill
We need to get off the OTC cesspool ... We will not have cleared the "tower" until we are off the OTC and on NYSE, NASDAQ, etc ...
All that is needed is PSPA amendment and consent decree ... that is all that is needed and I believe that happens soon.
Icing is court settlement with DTAs ... Otherwise no settlement ...
Good luck!
About an hour in Housing comes up ... "They need to build capital ..." That's all we got from Mnuchin and Powell ...
Very tight lipped - looking at their faces and body language - and certainly reading way more into it than what one should ... they already have the answers and they were squirming, struggling to come up with the most vague answer they could.
2 cents ...
Anyone have a time in Mnuchin's Senate BC where he discusses GSEs? I skimmed thru and couldn't find anything ...
Lamberth in 2022? How bout them contract claims ... ?
FOF - Divies aren’t being turned on for years. Even a remedy, unless ordered by Scotus, will probably take at least 6 months after a SCOTUS ruling. So absolute earliest is probably early 2022, and that is with a substantial remedy from a lower court.
Most likely it will take at least 2 and more likely 3 to 4 years to become buffer capitalized, and then there would be divies.
As it stands now, divies aren’t in play for a long, long time. That’s why PE sensitivity is better than JPS divy sensitivity. Plus, the only hope is a JPS conversion ... I don’t see how Calabria and Mnuchin do that without calculating fair market value, and performing the proper analysis that was done for the over 100 companies that received bailouts during the 2008 financial crisis on fair market value.
If Trump won maybe the runway would’ve been better for JPS, e.g., longer to organize a conversion without producing tight, now calendar driven events, that benefit commons dramatically more than JPS.
Certainly things can change if Calabria goes early, e.g., cap rule is lowered. But all things being equal, I don’t see how a quick JPS conversion works.
KaoBoy is lost in the weeds ... they’re trying so hard but a CRP in my opinion would delay a conversion ... investors will only see 15 to 20 billion to fannie alone annually and outstanding shares be damned. A potential worst case scenario of 5 billion outstanding shares still provides for a very healthy company providing 3 to 4$ EPS with a p/e of 10 to 15, you’re looking at $30 to $60 per share. Turn on divies and game over ...
mat —- did you just put Bove? And Ackman in the same sentence?
You’re joking, right? Please tell me ur joking ... and the only response that works is Chuck “Fredo” Gasbag ... the punchline to any and all jokes ...
Nice, Rick! Confirms our suspicions that these rag outlets are pay to play ... too funny ... it is how the game is played ... made popular by one of those 2008 market crash movies ...
Post was opened at 2:40ish and wasn’t submitted til end of day ... that’s all i got on the logic side - voodoo dolls and ouija boards are next ...
Bradford - do you believe the CRP will contain language associated with a JPS conversion?
JPS BagHoldens never learn ... this will all be fun in about 49 days ...
He is legend! And possibly in a diff time zone ...
Bradford - do you believe the CRP will contain language associated with a JPS conversion?
Bove ... haha ... throwing anything at the wall to see if it can stick ... Notice also the flip side of the information. Providing enough out there to keep the JPS hooked so they don't see either ...
$3.00 print. I think Ackman and Paulson are boxing this in for a measured rise to gain as much as possible before PSPA announcement.