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The only way the Gov can get an additional $100 billion out of the twins is by exercising their options or converting their sps. They also need to raise additional money in a stock offering and get total capital, after cancellation or conversion of sps, up to a minimum of $225 billion. Conversion of JPS and a $70 billion public raise gets them there. At that point there will be a minimum of 125 billion shares outstanding.
The only way the Gov can get an additional $100 billion out of the twins is by exercising their options or converting their sps. They also need to raise additional money in a stock offering and get total capital, after cancellation or conversion of sps, up to a minimum of $225 billion. Conversion of JPS and a $70 billion public raise gets them there.
When is record day? Day of verdict or Lamberth sign off?
The 10K might have interesting info. Next week could be good.
The 10K might have interesting info. Next week could be good.
Conversion has not happened yet because the gov does not want to own 80% before release and secondary offering to reduce gov state under 80%.
And it increases tier 1 capital by 33billion. Money they do not need to raise in the capital markets.
And it increases tier 1 capital by 33billion. Money they do not need to raise in the capital markets.
The January 2021 letter also said no release until warrant conversion.
The January 2021 letter also said no release until warrant conversion.
Commons have no say in a debt for common conversion. That is a Board of Directors decision and no court in the world would override it.
Public companies convert debt into equity all the time massively diluting their early shareholders. That is just what the gov will do. Convert their debt into 80 billion shares. And the companies will sell 20 billion shares to get the capital up to 200 billion. Gov then owns 80% they can sell for low income housing over the next 10 years.
Public companies convert debt into equity all the time massively diluting their early shareholders. That is just what the gov will do. Convert their debt into 80 billion shares. And the companies will sell 20 billion shares to get the capital up to 200 billion. Gov then owns 80% they can sell for low income housing over the next 10 years.
So where is today’s order from Lamberth?
All have to remember that JPS are not tier 1 capital so conversion reduces any needed capital raise by $33billion.
You forget the gov 79.9%
A cram down has to do with creditors, not stock. This would be exercise of warrants and a conversion of jps, with permission of a majority of the jps holders. Not a cram down.
Yes 50% plus 1 need to vote yes which means the large funds control.
Working off Tim Howard letter. The companies currently have $101 Billion on the books. As much as we all hate it, converting the JPS adds an additional $33 Billion to capital. Add $10 billion in 3rd and 4th quarter earnings and they are only $75 to $100 billion short to exit. Here are the steps;
1) Convert JPS at $1 per share adds 33 billion shares
2) Then convert warrants for 80% adds 139 billion shares
3) Cancel SPS
4) Sell 100 billion shares @ $1
Companies now have $245 billion in capital owned by,
1) Original shareholders – 0.66% of the new company
2) JPS – 12.04% of the new company
3) Treasury – 50,81% of the new company
4) New shareholders – 36.49% of the new company
A company earning $22 billion annually, with $250 billion in cash, at 22 times earnings is worth $400 billion. Value of holdings;
1) Original shareholders – $2.6 billion
2) JPS – $47.7 billion
3) Treasury – $200 billion
4) New shareholders – $144.5 billion
I believe this can be done without going to congress. Original shares would be worth about $1.44.
Most likely scenario;
Convert JPS to common at par at current price, 111,111,111,111 shares issued. Then convert warrants to 80% outstanding, 451,676,792,444 shares issued. Forgive SPS. Now 564.6 billion shares outstanding of which 1.8 billion share are original stock. Gov owns 80%. Fanny and Freddy sell 564.6 billion shares in the open market to raise $125 billion. Gov now owns 40% and sets the twins free.
Currently common market value is approximately $900 million. If after restructuring old common owns 1% of a $250 billion company that is $2.5 billion value, a 3 times return. No way to sue if the price increases to $1.50 per share.
Yes, it’s a Jan 2021 article, but it looks like Maxine will be replaced by McHenry on the House Financial Services Committee. That has to be a positive.
The Government will settle.
The “Housing and Economic Recovery Act of 2008”, signed by George Bush, gives Treasury and FHFA total control of the Enterprises, including “Capital Structure”. Treasury and FHFA can change the Capital structure in any way they want, but they must have a reason to do so, such as a court case. Treasury will never pay out cash, they will use the Capital structure to make a deal such as the following;
Settle the JPS lawsuits - $50 billion settlement by converting JPS to common at $5.00 per share, 10 Billion shares
Treasury converts SP and warrants and agrees to release from FHFA as a Conservator into stock 20 Billion shares.
Treasury announces the plan for going public once again, sell 30 billion shares to the public at $5 per share.
Total outstanding shares 61,808. Valuation at $5 per share $300 Billion
FHFA now has $100 billion in stock
Old common stills owns 1.9% of the company worth $9 billion, currently worth under $1 billion.
Everyone is happy
With both common and preferred in the mix, an evaluation for damages is impossible, the only remedy I see is eliminating the Third amendment.
The gov owns the capital structure.
No, the gov maximize it’s take by increasing the % owned. Once the twins are released, and warrants and Senior Gov debt has been taken care of, the estimated enterprise value would be between $250 - $300 Billion. In order to achieve $100 Billion payout they need to own between 30 - 35% of the enterprise, after the public raise. Additionally, the jps, by contract, is due $35-$50 Billion or around 14%. So 45 - 50% is spoken for leaving 45 - 50% for raising needed capital and the current shareholders get squeezed. So common shareholders want to wait as long as possible to build earned equity, the gov. wants private equity as a buffer ASAP, and does not want a jury trial. Next 4 months will be interesting.
Kneejerk reaction
This judgement, Fairholme Funds, is all about common stock and affirms what others on this board have been saying, common stock has no standing, and the gov. can wipe out the common without an issue. The JPS’s on the other hand still have taking claims going through the courts. If one case says that the taking claim is legitimate, then the gov. owes at least $33billion to the JPS. There is no way the gov. will pay out $33billion in cash, they will settle. What does a settlement look like? It is not a cram down, look at how they handled Chrysler. The gov. wants $100billion, the JPS want $33billion and they still need to raise capital. The gov. can give the twins a $100billion backstop to be considered tier one capital. The twins would have to pay say 5% annually on this, $5billion, then they would need to raise approximately $75-100 billion to properly capitalize the companies. So, if the twins are worth $250 billion it is divided 40% gov., 45% new capital, you need to add in some appreciation, 13.2% JPS, and the remainder 1.8% to current common, that would put common worth $4.5billion or around $4.50 per share. And there you have a settlement.
The only way to make us whole is to void the 3rd amendment. If the courts rule it is a taking it is a good possibility the remedy is to void the 3rd amendment, the Gov will then negotiate so they do not have to put cash into the twins. Write down the seniors, adjust the tier one capital, perhaps with a $100 million explicit guarantee, exercise the warrants, convert the juniors, an additional $35 million tier 1, move to the NYSE and raise an additional $75 million and they are free.
The conservator has full power to change the equity structure.
Releasing the twins makes most of the suits moot. The gov. does not want those doc. released and so must settle. Settle with the preferred by converting to common, exercise the warrants, move to the NYSE, raise money and release.
They do not want these court cases, too much information on Gov fraud. After the dismissal is thrown out, the Gov will negotiate in earnest as the 4th amendment says.
Yes, As previously reported, the parties have had productive negotiations over the past few weeks to
narrow the range of issues addressed in Plaintiffs’ motion.
Remember, the 4th amendment was signed only after extensive consultation with BIG Janet. The gov is for releasing.
Read the 4th amendment, https://www.fhfa.gov/Conservatorship/Documents/Senior-Preferred-Stock-Agree/FNM/SPSPA-amends/FNM-Fourth-Amended-Restated-Certificate-04-13-21.pdf, it is a roadmap to exiting conservancy. Mnuchin said "“If they rule in Treasury’s favor it simplifies things,” he said. “If they rule against, it’s still going to end up in litigation.” https://wcoinnews.com/politics/mnuchin-says-hes-likely-to-back-changes-to-fannie-and-freddie/
The Treasury is negotiating with with all parties in all continuing suits, the SCOTUS decision has lowered expectations making the current negotiations somewhat easier.
You don't understand how much dilution the common will incur. 1) Treasury will exercise the warrants, add 5 Billion shares to get Treasury to 79.9%. 2) SCOTUS will rule in our favor and nullify the 4th amendment and so 3rd amendment is still in place. According to court experts, if the 3rd amendment was the controlling document the senior preferred would be deemed paid and we would have been overpaid by approximately $35 Billion. This means that the companies would have started to pay dividends to the preferred, and so the preferred are now at par + 5 years of dividends. The companies are trying to conserve cash so they will need to make a deal with the JPS to convert to common at say $3. Add 13 Billion shares. Companies now have $45 Billion retained earnings, $35 Billion from the Treasury, $35 Billion from JPS conversion, $115 Billion total. Raise $140 Billion and they are 1st step out of Conservatorship. How do you raise $140 Billion? Companies now have 19 Billion shares outstanding, Company worth $300 Billion, 46% = $140 Billion. New buyers need to end up with 46% of the ending shares so 46% of 41 Billion shares = 18.8 Billion shares to sell. Total outstanding shares = 41 Billion $300 Billion Company current stock valuation = $7.31 per share.
That is correct, and of the $300 Billion the gov. got, it owes back $35 Billion after the 10% is paid.
I was replying to the $200+ stock price being promoted.