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Even Gretchen perpetuates the false narrative in the first sentence:
In August 2012, the federal government abruptly changed the terms of the bailout provided to Fannie Mae and Freddie Mac, the mortgage finance giants that had been devastated by the financial crisis.
Cmdr, always appreciate you keeping us informed. Question: is this really that much different from the previous disclosures showing that Fannie's CFO expected the return to profitability AND that the death spiral story was bogus? It is good to see more documents come to light but I can't see this as a game changer in anyway unless I am missing something. cheers
Sell in May and go away ... just never imagined it was for 9 years (and counting ...)
Rek and Bull, 2 things ... 1) as lending standards "relaxed", new home construction climbed from 1M units per year in 1991 to 2M in 2006 - and the 2M/yr rate was 33% higher than the 1.5M average over the preceding 38 years. Lenders AND builders together created WAY too much supply ... uh oh, look out below. And 2) if the rating agencies had done their jobs in the first place, we may not have had the 2008 crisis.
Still hoping for a judicial miracle as it seems wall street (aka the administration and congress) are hell bent on the demise of FnF.
Cheers
Ruling from SCOTUS that allows gov't to pass regulations for "public purpose" that dramatically reduce property value AFTER someone acquired the property. I wonder if someday this could hurt FnF shareholders. http://hotair.com/archives/2017/06/24/murr-v-wisconsin-scotus-deals-another-blow-fifth-amendment/
If nothing else, the new Minnesota law suit thoroughly documents the ENTIRE scheme of placing FnF into cship and the subsequent 3rd amendment. The people who conduct all of the research and then compose powerfully written complaints are to be truly commended. I know, the courts may still block this effort, but the body of public evidence against the entire scheme continues to grow - and we've only scratched the surface of the discovery docs. I will continue to hold my pre-cship shares until this is finally settled, one way or the other. cheers
my bad ... I though ruling that the NWS was conserving was bending over backwards
And given that the gov't has unlimited time and money to drag this out, even if they did lose in Delaware, they could just say "Ok, the NWS rate is 99% in relation to the 1% we'll give the rest of the share classes" Problem solved. I still think our main problem is that HERA is unconstitutional. Hopefully the most recent lawsuit will get to that matter ... before I die of old age.
Starting on page 22 of the filing, the Ps address the crux of their argument which is 1) the NWS dividend is not paid at a "rate" and 2) it is not paid in "relation" to dividends paid to other share classes. But given that courts said FHFA/Tres did not need to conserve assets because HERA made that optional with "may", why couldn't the court say that the NWS rate is 100%? Isn't 100% a rate? And as far as in "relation" to other dividends, a 100% rate IS in relation to 0% - you may not like the relation, but it is in relation nevertheless. My point is that I'm not so sure the Ps have a slam dunk case as much as I would like - and as others quickly pointed out, the court have bent over backwards to accommodate the gov't. Yes, this would be different as a jury case, but we have to get past the court first just to have a trial. cheers
Sogo, I totally agree with you that expecting the rule of law to be upheld should not be consider speculation or unreasonable. I've tried to persuade rek, but to no avail, so I gave up trying. cheers
rek, I think you can run circles around me in many regards, but I respectfully disagree, completely, that you can say with certainty that thinking the rule of law should be upheld is speculation. I certainly hope that is not the case. cheers
rek, I don't recall any ruling on the NWS per se, only anti-junction/option to ignore traditional conservator role. Did I miss something? If not, then we don't know if the NWS is legal yet ... and if that is correct, then some might have invested with the expectation that it wasn't. Isn't that what Judge Brown is saying? TIA cheers
Unfortunately, HERA says "may" (not "shall") re traditional conservator duties, so even though Watt (now) wants to follow tradition, the government's attorney don't, and the appeals court backed them. Lamberth told P's in his original ruling that the law (ie Congress) was the problem with the anti-injunction clause (and making traditional conservative duties optional). Since we know Congress essentially does not read legislation before voting, HERA was passed and here we are. Either Delaware advances (I'm doubtful), the 11K docs have a smoking gun (I'm hopeful) or a miracle happens in the other courts (... crickets ...) - otherwise, shareholders will have little leverage in shaping a resolution. BTW, I hate to say this, but given the truly evil brilliance of inserting "may" for "shall", we are facing a very skilled opponent holding most if not all of the cards. Still holding my 50K/$6ps pre-cship shares and hoping ... cheers
... and today's top story, hell froze over (with all due respect to the cmdr)
Wouldn't the presiding judge first have to rule on jurisdiction - and could that be a show stopper if the judge finds FnF are DC corporations (as the Ds claim)?
Many have characterized the Delaware case as a near slam dunk, especially given Judge Steele as a plaintiff. But as I keep saying, it is incredibly useful to read the court filings as, if nothing else, they will give you an appreciation that each side can make some very convincing sounding arguments. cheers
http://www.glenbradford.com/wp-content/uploads/2017/05/pagliara-oral-argument.pdf
Yes, if they uncover corruptions that otherwise won't see the light of day. see also - Watergate, Pentagon Papers, Wells Fargo, etc., etc. ...
cmdr, on the surface, the case seems simple, but when you read the actual filings, its incredibly complicated and could get tripped up in many ways. Despite the indisputable superb qualifications of Judge Steele, the market is not expecting a favorable outcome, as much I wish otherwise. Just staying grounded - and many thanks for sharing your privileged communications with the Judge. cheers
Collins decision is disappointing but not unexpected given the growing reliance on the Perry rulings. Looks like we're getting down to the Delaware case and/or the 11,000 docs that might not necessarily reverse the basis of the Perry decisions, but might be embarrassing enough to trigger a settlement. cheers
It would take years for someone to categorize all of the lies that have been told about FnF, starting with the announcement that FnF were in great shape days before being placed in cship, the infamous death spiral, etc., etc. etc. I am mystified how anyone can believe anything stated by a senior official and/or elected official given the very deep ties to WS and/or special interest that control their ultimate agendas. I used to read all of the posts, but not anymore. If your time is limited, stick with the real Tim Howard and gselinks - and read the court filings to fully understand that there is NOTHING black and white in the law, especially at the level were stuck in. cheers
"Honest" reporting? ...
cmdr, really appreciate you sharing these updates with us, especially given the potential importance of this case. cheers
donot, the exercise price of the warrants is $0.00001 per share, so proceeds will only be around $40,000 to fnma. Then, when the UST sells their shares from the warrants, the proceeds will go to the UST, not fnma. Wish it were otherwise ... cheers
I do think that the WH/UST might care about preferred holders (only to the extent they are WS buddies); otherwise, only the courts care about shareholders - and that only to the extent they are forced to by the law.
Agreed. I don't thinks shareholders will be totally wiped out, but given the whole (false) bailout narrative, "protecting shareholders" just may not mean much after the warrants and recap dilution. cheers
remember, fixing fnf does not necessarily mean caring about shareholders
I continue to believe that no one in any actual decision making position will say anything definitive UNTIL a proposed solution is nearly final, or final. No one wants to make the mistake of making a premature statement about two of the largest financial institutions in the world that are subject to the NWS under cship. The stakes are way too high. Personally, I think that short of a meaningful development in the courts, the congressional/administration "solution" is still a long ways away.
As a valuation expert, do you really think the company would be selling at $2-3 per share without cship and the sweep? If the sweep were to declared invalid, or just end, what do you think the company would be worth BEFORE any recap dilution? Just curious
cap, I totally agree that the net income PER SHARE will be reduced from the dilution, but I don't agree that the value of the company will remain unchanged after adding $100B in capital. I do think the pps will decline, just not to the level you think. cheers
clarification - I can't follow your method that says it will take approx. 13B shares (19B - 6B) to raise $112B. sorry about that
cap, I'm using a simplified example to illustrate a point. If a company has a perceived market value of $180B based on NI x PE ratio, and they have approximately 6B shares, the market (not book) value is $30/sh and they should be able to raise money close to that value. If they do raise $100B to recap (or whatever amount), the amount raised is added to both the market and book value ... and the market (not book) value will still be close to $30/sh. As I mentioned before, the key assumption is the NI x PE ratio in determining the market value per share and the price used to complete a recap offering. In short, I can't follow your METHOD below that says it will take 19.34B shares to raise $112B.
$111.836b is what is required to make them whole again.
$12.31b NI x 14.62 PE = $179.97b Mkt cap
$179.97b - $19.13b pfd's = $160.84 mkt cap attributable to commons
$111.836b recap assumption
$111.836b / $160.84 = 69.53% weight of recap
100% - 69.53% = 30.47% weight value of total shares
5.893b current shares out / 30.47% = 19.34b total shares required
$160.84b / 19.34b = $8.32 pps valuation
Like an IPO, new issues are done on discount to value to encourage transactions = $8.32 - 10% = $7.49 pps
cap, bear with me on this ... you start with the assumption that $12.31b NI x 14.62 PE = $179.97b Mkt cap. ... but dividing that by 5.9B fully diluted shares (i.e. warrants exercised), gives a pps of $30.50. I now go to the market to raise the required recap of $112B, so I need to sell 3.7B additional shares, bringing the total shares to 9.6B BUT you MUST also add the $112B in paid in capital to the value of the company, which is now $180B + $112B = $292B divided by 9.6B shares brings you back to $30.50/share. Yes, there might be some discounting (15% - 20% high side), but that still puts the pps way north of $20. So, basically, I'm saying that if you start out with a company worth $180B and 5.9B fully diluted shares, you are going to price the equity offering to recognize the then current value of the stock which is $30.50 (less a placement discount). Thoughts?
cap, go back and look at the original statement by contrarianbull that i was responding to. having said that, there is nothing wrong with your methodology either, it just starts with two highly speculative assumptions - that is, the net income and pe ratio. IF IF IF those assumptions were true at the time of the raise, than your calculation is simply one method that might apply - though you don't take into account possible warrant coverage on the raise. btw, yes, i did raise over $300M in equity in ipo's (s-1 filing), private placements, primary & secondary, underwritten and best effort offerings. cheers
Ok, I'll bite. I did many public equity raises over 15 years and, aside from underwriting fees, discounts and warrants, the math was pretty straightforward. What would you suggest as additional considerations?
yes, but close enough for the sake of illustrating how high the common pps would have to be to raise $100B with 5B shs
yes, but close enough for the sake of illustrating how high the common pps would have to be to raise $100B with 5B shs
yes, but close enough for the sake of illustrating how high the common pps would have to be to raise $100B with 5B shs
Agreed ... I was just saying that the NWS can be ended without necessarily being voided
I think your math is fine - the question in my mind is how to we get to $25/sh jr pref from where we are now. Not impossible, but that's a long way to go from today's prices.