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Odd. The $25s are still ~3.5x FNMA and the $50s are still ~5.5x FNMA.
What is the market trying to tell us?!
I'm guessing it's saying, there's a lot of dilution incoming and you don't want to be stuck holding the bag of Commons when it hits
The SPS Cramdown Plan might be the cleanest, fastest, and easiest way to recap the GSEs.
Especially if SCOTUS (Seila) rules FHFA Director Calabria is removable, then I don't see how we don't get a Sr. Preferred Cramdown Recap if Biden wins in November.
FNMA will absolutely get its knees cut off in this scenario, but that's the risk of investing in Common shares.
Even with Consent Decree, Biden may impose additional requirements which may make Recapitalization complicated, maybe even impossible.
SPS Cramdown makes the most sense and Morgan Stanley & JP Morgan will likely push for this since it's quick and easy. They want their pay day sooner rather than later!
I hear there are several law firms taking FNMA Common shares as a Retainer for future lawsuits.
Just tell them about the pending Treble Damages and I'm sure they'll take the case for a few thousand shares of FNMA
It's pretty simple actually. Either Jr. Preferred dividends get restored (which seems unlikely considering the interest rate environment).
OR
JPS get Converted to Commons at some percentage of Par Value ($25 or $50) at the time of the re-IPO -- which is likely going to occur around $5.00 [Pending Reverse Split].
It's not like the companies are going to Sell new FNMA Common shares just to "Call" the Jr. Preferreds at Par. Or in other words, ~$30B in additional dilution to Commons. That makes no sense and it's a heavier lift for the Financial Advisors who are already going to be raising the most capital in the history of IPOs.
Morgan Stanley & JP Morgan are likely telling the FHFA/Treasury/GSEs that their Options are limited.
The Election Clock is ticking for FNMA Commons.
The Market doesn't believe the SEC Letter theory. Otherwise, FNMA wouldn't be trading at $2 after all these years.
Does the SEC even ship to Canada?
Sadly that conclusion is based on FNMA Fantasy and isn't supported by the FNMA Facts.
The Courts won't matter as this will all be decided for FNMA in the next 5-6 months.
It's coming amigos!!
Both Sr. Preferreds and Jr. Preferreds may Convert to Commons. This cannot be ruled out whatsoever and FNMA Commons know this.
Only FNMA Fantasy can ignore the most likely scenarios.
That's certainly within the realm of possibilities. It's good to see FNMA realizing this
Ahh yes, the Sr. Preferred Cramdown Plan. It's very scary and something FNMA Commons need to be mindful of, especially as the Election Clock is ticking.
If Biden wins the election, the Cramdown Plan may be the only option for the GSEs to exit Conservatorship. Unfortunately, it hurts Commons significantly (diluting them to sub-2% ownership) while allowing Jr. Preferreds to come out practically unscathed with a big pay day.
Will there not be more lawsuits if they go this route?!
So FNMA Commons aren't going to the moon? And there isn't a Super Secret Escrow Account?
You're telling me it's almost certain the Warrants will be exercised? Are you suggesting the Sr. Preferreds may be Converted to Commons?
And you're also saying the Jr. Preferreds may Convert to Commons also?
When FNMA Fantasy meets FNMA Facts, the knives come out
Jr. Preferreds Converting to Commons is highly likely. Why do you think it gets discussed so frequently?
Warrants are almost certain (98%) and a JPS Conversion is a very high probability (80% or higher).
FNMA Facts and all that...
Do you think he's done hedging his Common position with JPS? It seems likely Ackman would continue to add Jr. Preferred since he definitely had a sudden change of opinion re: Commons and JPS last year.
My guess is he keeps adding Jr. Preferreds and either keeping his Common position the same or reducing it significantly.
Unfortunately, we won't know until after he's done it
Exceptional FNMA Facts! Thanks for sharing the Conversion study of Citi's Jr. Preferreds.
We should all understand that Conversion as it will likely be replicated with regard to Fannie's and Freddie's Jr. Preferred shares.
It's coming amigos!!!
I don't own it. Only hedge funds and people that like over-paying buy FNMAS. Watch the other Series of JPS for the real action
No need to worry, Jr. Preferreds aren't Commons. With the Recap Plan set in motion, there's really no way to short-change JPS.
They either get Par or Commons get Cancelled. It's really that simple amigo.
Watch and see. It's coming!!
Will FNMA go back to the Dollar Menu tomorrow?
From Adam, Google board...
"Commons are likely not a good investment, they're only for trading. Jr. Preferreds are better for a lot of reasons."
From Jacob, Google Board...
With Warrants (79.9%):
PPS = $5
With Sr. Preferred Conversion (99.7%):
PPS = $0.25
Massive dilution for FNMA Commons has been confirmed by Calabria already.
What comes next is what we're all waiting for. Holding the shares with Contract Rights is a wise decision to make
Correct! After the JPS get Converted to Commons, they disappear and then get to realize all of the gains Commons get thereafter.
It's a great world for Jr. Preferreds!
A Reverse Split is the quickest route, I agree.
10:1 Reverse Split FNMA and re-IPO at $30-40. That makes a lot of sense!
Cheering on a -2.4% day. No bueno amigos.
There's still a few innings left. Let's see how things shake out for Commons / Jr. Preferreds in the months ahead.
The Election Clock is ticking for the shares without Contract Rights
Dumping at $5, 10:1 Reverse Split equals $50.
This isn't rocket science. FNMA never sees double digits without a Reverse Split.
The numbers don't lie.
Red for FNMA is more likely than Green. The market has gotten ahead of itself due to irrational exuberance.
Commons should be trading sub-$1.50 based on where the Jr. Preferreds currently trade.
FNMA Facts and all that
The Warrants have to be exercised before the re-IPO.
Commons won't be happy, but life goes on. Lawsuits be damned!
This explains a lot. Thanks for sharing Facts about FNMA.
Thank you for clearing this up. FNMA Facts are important and this is great information to keep in mind regarding the upcoming capital raises.
If SCOTUS just severs the Removability Clause, how exactly does that help us other than to allow the immediate removal of Director Calabria by Pres Biden?
And if Biden gets that power and implements one of his anti-GSE stooges, you can kiss Commons goodbye since they don't have Contract Rights and no Direct Claims are being allowed to move forward in Sweeney's Court.
Will Roberts vote on Seila and FHFA cases?
I hope this isn't a precursor of how he would vote.
It seems the Courts have just become even more uncertain for us.
How over-valued do you think FNMA currently is?
But will we visit the Dollar Menu yet again before that happens?
And will it take a Reverse Split to get FNMA above the 5 Dolla' Holla'?
It's exciting to wait for the SCOTUS decision in Seila. Unfortunately, it doesn't directly affect FNMA in any way, shape, or form unless they grant backwards relief (which is highly unlikely).
You can wait until the market tells you that, or you can listen to me now