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But you have also used the idea that the LP ratchet was its own breach to contend that Treasury is likely to write down the seniors.
I'm just saying that any intentional thwarting of the shareholder's ability to realize their side of the contract is a breach of the implied covenant. You are correct, in that this is not an automatic thing - it would take a court to determine, or FHFA/Treasury may take proactive steps to avoid an obvious exposure of legal risk. This would be beneficial for them, especially if mitigating that risk serves to aid in the goal of releasing the GSEs in a timely fashion. There is more to investment than being technically correct about a legal theory.
Nobody had NWS on their bingo card in 2008, and many don't have SWF on their bingo card today. There is no technical reason for many of the steps that have occurred, yet here we are. Human nature, political shenanigans, and optics can lead to less than technically correct outcomes. That's exactly how we got into this situation to begin with, and it's likely to still show up in the resolution. I based my investment on the premise of continued flawed outcomes.
This is only an argument for why the shares still trade at above-zero prices. It doesn't refute the argument that since the NWS removed all economic rights, no further amendment or agreement can take anything more away.
You still don't understand the word "temporary?" If I remove your rights to drive your car by suspending your license, does that mean no further agreement or action could take anything more away? Of course it could. Perhaps I could throw you in jail for the rest of your life (permanent conservatorship), or give you the death penalty (receivership). Either of those would make permanent what is currently just temporary.
Just like you can get your license reinstated at some point, the shareholders are also merely suspended. The shares have not been taken away, killed off, nor has anyone said the Conservatorship will become permanent. The rights will be restored. If you don't believe that, then don't invest in common. Pretty simple.
Only a court can settle our disagreement as to whether or not the LP ratchets in the 2019 and 2021 letter agreements were a breach of the implied covenant.
I'm not saying they are a breach. I'm saying they are very similar to the NWS which was a breach. This makes it easier to identify similar or identical breaches in the future. I agree that it's not officially a breach until a court says so, or if FHFA and Treasury amend the agreements based on the prior breach to mitigate exposure to future breaches.
In other words, speculative value. That's all either the juniors or commons have right now. No actual economic rights because those were removed by the NWS.
You keep forgetting the word "temporary." Economic rights are currently temporarily suspended. Unless you think the Conservatorship and NWS will exist in perpetuity... When it goes away, what happens to the rights?
There are tons of ways to structure things so that the SWF gets the economic benefits of owning >90% of FnF common without having to worry about a controlling stake. Giving up voting rights is only one.
Ok, but what does this have to do with Treasury owning 92% of AIG for a very short period of time?
Answer: Nothing. Two totally different scenarios that you want to cherry pick from.
There's only one thing that could truly settle this disagreement, which is actually filing a lawsuit. Sound familiar?
Familiar and incorrect. When the GSEs are released, which they will be eventually, we will see what residual value remains in the common. I do not need to file a lawsuit to reap my share of the residual value. Time will tell us more accurately than a court document.
Lamberth clearly disagreed with that last part because he didn't allow any damage models other than the price drop one to be used.
There is a vast difference between harm being done, and being able to calculate damage from that harm. Lamberth was only interested in what can be objectively proved in court as factual. There is no crystal ball of what "could have" been, therefore that harm is inadmissible. It doesn't mean it doesn't exist.
The NWS removed all of common and juniot pref holders' liquidation and dividend preference, and the letter agreements kept that status quo in place. What remains?
The fact that the NWS and Conservatorship will not and can not last forever. The Conservatorship, and the actions such as the NWS and SPS agreements are temporarily suspending common shareholders rights. The rights are not gone, the shares have not been retired nor "taken" or otherwise deemed worthless. They could be - through some future action. But the current trending news is hinting at release with residual value.
No, Rick is correct. The Charter Act establishes the GSEs as private companies. That would need to be changed if there is either GSE were to go away, or for a merger to some new company. Changing the Charter Act (law), would require Congress. FHFA as Conservator cannot rewrite the law.
"Breach of implied covenant" is fine because it's not ambiguous. Merely saying "breach" is, which is the problem.
Geez... Ok, let me fix it for you, so you don't have to focus on a few words missing instead of the gist of what I'm saying.
Well now that the jury verdict is entered as final judgement, we don't need to rely on the shareholder's opinion of the validity or legality, do we? It's now clear that the NWS violated the shareholder agreement. Likewise, the language of future contracts or amendments also do not stand on their own. Meaning if the contract gives away shareholder rights, the contract is in breach of the implied covenant of good faith and fair dealing. You keep talking in circles but you aren't addressing that if something violates the shareholders side of the contract, it's a breach of the implied covenant of good faith and fair dealing - now and in the future.
How do you still not get this? A "reasonable shareholder" who bought their shares AFTER the NWS has no expectations for any economic rights ever, because the NWS removed them.
I would disagree. If someone buys a common share today, clearly after the NWS, they are expecting economic rights. This is reasonable in light of the Conservatorship being temporary, the NWS having been deemed a breach of the implied covenant of good faith and fair dealing, and the Charter Act which creates these as privately owned entities, not government owned. Are you saying that every buyer of common stock is unreasonable?
Lamberth said that the NWS caused permanent harm. That permanent harm became the reasonable expectation at that point because the NWS became the most recent amendment
Permanent harm and total loss are not the same thing. In addition to the single day drop in share price, there is a ripple effect that was ongoing, via suppressed share price, lack of dividends, etc. Nothing that could be calculated as damages, because we can't say what would have happened if not for the NWS, but there is implied damage beyond the initial price drop. It could also affect the ability to get new investors, it could impact future PE ratios. The GSEs are forever tainted. But at no point did the court say that the GSE shareholders relinquished their rights, or that the GSEs could not be released and/or recover economic value for shareholders. We get the jury award and KEEP the common and preferred shares and economic rights contained therein.
I guess I have to break out the "king of technicalities" crown again here
Apologies if I have been misgendering you. Would you prefer to be called the King of Technicalities or the Queen of Technicalities?
The controlling interest part isn't a problem. Treasury owned 92% of AIG common and never had an issue with that.
Sure, as a temporary measure to give Treasury time to sell off the shares, and they relinquished any common voting rights in the meantime. But does Treasury own any publicly traded companies in perpetuity? That would be news to me.
Was CDR totally liquidated, as in all of its assets were sold and creditors paid off? Or did its balance sheet just get consolidated onto WHLR's?
Yes, as far as I recall, they sold off their assets - mostly real estate holdings, and used the proceeds to pay down debt, and buy back all of the common stock. I don't know if they paid off all debtors, or just the ones that required them to do so. There were some assets left over, but not enough to redeem preferred, so they were left untouched. Again, going off memory - I don't believe their balance sheets were consolidated. They used some stock gymnastics - Wheeler "owned" CDR via one remaining common share that they controlled. CDR technically was still it's own entity, but no longer publicly traded with the single stock remaining. That left the preferred in limbo and fully under control of Wheeler.
The argument by Preferred holders was that in a liquidation scenario, preferred should have been redeemed before common. Under a change of control scenario, preferred should have been given the option to convert their preferred to common. Neither of those things happened, however the lawsuits were dismissed. There were a few of them, this is one that I think summarizes the situation: Kim vs CDR. The allegations were for a breach of the implied covenant of good faith and fair dealing, and breach of fiduciary duty.
I would need a bit more detail (like answers to my two prior questions) before knowing how applicable this example would be to FnF.
I don't believe it's relevant to the GSEs, unless there is some new entity established that FnF get merged into. That would require Congress, so seems highly unlikely to me. The only relevant part is that the Preferred holders thought they were in a much better situation than they ended up in, convinced they should have gotten first dibs. While that is certainly directionally correct, there is always the possibility of some new and novel way to screw people over.
Please do explain to me how your above can apply to our situation.
Pretty sure I said in the post that the situation does not apply to GSEs. However, the similarity may be how confident and sure the Preferred holders were that upon liquidating the CDR assets that they would be redeemed first - at or near par, and common would get the scraps. It didn't quite happen that way.
I have already written this post, and this other one as a follow-up, regarding this same stupid argument (that the juniors can be wiped at all, let alone without the commons also going to zero). It's just schadenfreude-fueled wishful thinking.
I can give you an example of Preferred getting screwed relative to Common from my personal experience, if you care to hear it. Cedar Realty Trust(CDR) which got bought by Wheeler Realty (WHLR). They paid $29 per share to retire the CDR common (my cost basis was $5.58 - so great for me ). After liquidating the common, there was not enough residual value to liquidate the preferred. They essentially just skipped over them to pay common off. So the Preferred did not get redeemed, and instead just went under control of the acquiring company. Preferred holders were livid at the premium conversion common was getting in what was essentially a liquidation, and that they were getting nothing - dividends not even being paid. After acquisition, Wheeler struggled to pay dividends to the old CDR preferred, which of course affected the share price. Preferred holders were stuck or sold at a loss, whereas most common holders realized significant gains. I haven't been following for a couple years, but I think the plan was to convert the CDR preferred into Wheeler common, causing massive dilution and paled compared to the CDR common liquidation price.
Now before you get too excited, I'm not saying this is relevant to the GSEs or that common will get paid off and the Preferred stuck with some GSE newco. I'm just saying there are examples of Preferred getting hosed relative to common, and lawsuits and attempted injunctions did not help.
It's hard for me to get a read on how Treasury putting its FnF stake into a SWF would affect current shareholders, either common or preferred. There are many ways to structure it.
I can say I have no idea either. So we finally agree on something.
I don't know that keeping the actual exercised shares in the SWF makes sense, just to provide that implicit guarantee. If the stress tests show just how incredibly strong the GSEs are, we don't need a mechanism for a government backstop.
I think they'd be better off to use the 79.9% warrants (or substantially less), to generate $100-200B in cash to put into Gold or ETFs or Index funds so that they do not have controlling interest in any particular company.
If someone else can provide similarly rigorous and reasonable arguments for a LP writedown then I will give them serious thought. I have yet to see any, however.
Well I'm sorry the entire IHUB board is a disappointment to you, narcissist! 🤣
And we're not talking about "people" here. Only you. I'm not on a high-horse here. I'm simply pointing out that your words (only wanting to make money compared to your cost basis) do not jive with your actions (continuing to hold shares even though you could lock in a gain by selling everything). Hypocrisy, plain as day.
For someone who claims to not understand my methods, you sure do have a lot of advice of how I'm not following my own method. Well, let me go sell all my shares then, so that KThomp won't think I'm a hypocrite! 🙄 LOL! That's what you think my investment strategy should be? Do what KThomp says or I'm doing it wrong? BWAHAHAHAHAHAHAHAAAAA! You become a bigger joke with every post.
What's nonsense is your total mischaracterizations and exaggerations of what I post.
Please... Don't make me bust out another poll the audience to see what the average person thinks. Not that it would do any good with your apparent lack of self-awareness. I'm not exaggerating at all. I'm providing you cold hard examples of when you are spouting nonsense.
You do if you don't want to be seen as a hypocrite.
So you think that not only do you get to dictate what I MUST do... You get to determine the repercussions if I don't? Again, the examples are self-explanatory and obvious to everyone but you. You are so full of yourself, hence me calling you a narcissist.
Again, breach of contract is not at all the same thing as breach of the implied covenant of good faith and fair dealing. Stop conflating them. The jury decided that the NWS, which removed all economic rights from FnF's shares, did breach the implied covenant.
I've said before - it's just easier to type "breach" than "breach of the implied covenant of good faith and fair dealing". You may want me to type it out every time. But you are not the boss of me, narcissist. And you don't type it out fully every time either, as directly quoted above. Hypocrite!
After the NWS was signed, reasonable shareholder expectations got reset to "shareholders get nothing ever". How is that even possible to violate?
Geezus how does this even make sense? If a "reasonable shareholder" expected to get nothing ever simply because the NWS was signed, why on earth would they have brought a lawsuit? Ahem.. Because it's UNRESASONBLE you nitwit! And they were right, because they won. Your argument doesn't hold up to even light scrutiny.
Additionally, the conservatorship is not intended to last forever, as said by various official sources. Therefore, a reasonable shareholder would assume the NWS would end at some point after Treasury has been repaid. Because you can't NWS a public company. That means there is future economic value in the shares. Basic logic - try to use that big brain of yours.
The Financial Times article suggests that Donald Trump should consider creating a Sovereign Wealth Fund (SWF) using Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs) that have been under federal conservatorship since the 2008 financial crisis. The idea is to leverage the substantial assets and revenue streams of these mortgage giants to establish a fund that could provide initial capital and facilitate their privatization. This move would aim to reduce the government’s role in the housing finance system while potentially generating significant funds for other priorities, like infrastructure or tax cuts, aligning with broader goals of fiscal efficiency and market-driven reforms. The article likely frames this as a bold, yet complex, strategy that could reshape the housing market and public finance, though it would require careful execution to avoid disrupting mortgage availability or economic stability.
That means that any further alleged breach of the implied covenant, like Jester claims with the LP ratchet, has to be proven to have done damage above and beyond that of the NWS itself. That argument can't logically be made...
Let's apply this example in another way. Let's say you and I enter into a contract - to protect trade secrets for a product we jointly sell. You violate that contract, giving our secret to Taiwan. This makes our product worthless in the market because we can't compete; we are forced to stop selling that particular product. We go to court, and the jury agrees you violated the contract, caused $1M in harm by removing all future sales & profits of that product by our company, and enters judgement for the plaintiff. The contract to protect trade secrets remains intact, as changing it was not part of the remedy. You promise to pay the $1M. You then go to China and sell the same secret to them, and then go to India to sell the same secret to them.
By your reasoning, you should be allowed to do this because all the economic harm - as in future profits of that product by our company, has already been compensated for? So further breaching our contract is perfectly fine? You think you should be allowed to continue to reap ill-gotten rewards with future breaches that are inherently similar to the first breach?
Going back to the GSEs - your logic would mean that the GSEs can now trade FMCC common and all Preferred shares for a small fruit basket and a thank-you card. Because those shares have zero economic interests, outside of the Lamberth court award. Now those shares can be violated in any way shape or form that the GSEs see fit? I think not.
That's exactly my point. Being directionally correct is much more important than being exactly correct
That's funny. So you provide an example that is close to your prediction and that's evidence of your point? I'm pretty sure if someone provided an example that was close to their scenario of LP being written down, you would NOT accept that as being more important than providing factual calculations, probability estimates based on what almost happened in 2019, or some quote in a book, filing a lawsuit, or something more than just directional.
If all you care about is making money compared to your cost basis, you could sell everything right now and lock in a 100% chance of a gain.
Look, it's pretty clear that you don't understand why people hold this investment, particularly commons. Sometimes it's more than the money, it's the principle of things. I'm sure you agree that what has happened since 2008 is not right, the courts were duped or complicit. The shareholders were screwed. Many shareholders are long and will wait for final resolution rather than just get their head above water. Others trade on shorter timelines and play the swings in prices. Neither is a wrong strategy. Different people invest differently. You should get off your high-horse and let people be.
You can provide valuable insight when you stick to facts, information, calculations, and opinions, without the need to put down other's opinions or methods.
You are welcome to stop whenever you like. And isn't thoughtful discussion supposed to be the point of this board? 😉
Yes, agreed. Key word is discussion, not dictatorship. If someone isn't willing to jump through your hoop, file a lawsuit, post a calculation, just let it go. It doesn't mean their viewpoint is not relevant.
Reasonable shareholder expectations are set based on the actual language of contract or amendment, not on their opinion as to the validity or legality of said contract or amendment.
Well now that the jury verdict is entered as final judgement, we don't need to rely on the shareholder's opinion of the validity or legality, do we? It's now clear that the NWS violated the shareholder agreement. Likewise, the language of future contracts or amendments also do not stand on their own. Meaning if the contract gives away shareholder rights, the contract is in breach. You keep talking in circles but you aren't addressing that if something violates the shareholders side of the contract, it's a breach - now and in the future.
The NWS already completely thwarted the implied covenant by denying shareholders any economic value going forward.
If the GSEs were forced to pay the court awarded amount in lieu of shareholders continued holding of interest via the common or preferred shares, then I would agree with you. But the shareholders get the award and keep their shares. Shareholders have a reasonable expectation that the shareholder agreement will not be violated in the future. The shareholder agreement is still in place, not modified whatsoever. The shareholders therefore have a ongoing interest based on those shares and the continuing implied covenant contained therein.
Your name-calling, on the other hand, includes things like calling me "narcissitic" and "smug", which are subjective assessments that have nothing to do with the conversation
Oh, but they do. Especially when you call people hypocrites, expect them to perform actions that are unreasonable, act as if you are the boss of them, and then say their arguments have no merit if they don't jump through the hoop you provided. It's complete nonsense. Do you realize that subjective assessments are perfectly valid on a discussion board? You certainly don't act like it.
WRONG. Note that my sentence started with the word "if".
Yet again, queen of technicalities. Word choice aside, what were you implying in that statement? That I believe my methods are better than others? Or that I don't believe in my own methods because I refuse to share them with you? You are not the boss of me. I will share whatever I please.
Wrong again. You don't need to explain the math, but instead the probability and share price outcome for each scenario.
WRONG! Apparently I can't beat this into your head enough for it to actually stick. I do not NEED to do anything. If you think you are so important that I need to post information to satisfy you, see the Narcissistic comment at the top. When you continuously exemplify the behavior, it becomes less subjective and more "reasonable interpretation."
Let's say my scenario #4 happens but Treasury only gets 86% of the common instead of 87% and the commons end up at $1.75 instead of $1.50. That would mean that I was technically wrong (since that specific 86%/$1.75 doesn't show up on my list) but in essence correct (in that the commons lose a lot of money from here).
I don't even remember what your scenario #4 was, and I'm too lazy to go look. I'm just going to assume that JPS were converted at par in that scenario. In that case, your $1.50 and 87% would be directionally correct and you would gloat about how "correct" you were. Either way, it means squat to me - I make money in both situations. 50% or 75% return on my $1 cost basis Commons. Not as much as I'd want based on the investment timeline, but the Preferred would then put me firmly into the win territory.
Nitpicking on that level doesn't disprove my methodology at all. I don't have to account for millions of scenarios (that still wouldn't cover every possibility) in order to make a rigorous framework.
Likewise, I don't need to account for your narrower view and come up with a competing percentage of "probability" for YOUR scenarios for me to have a rigorous framework. All that would do would give you more things to argue about, and let's face it, you are EXHAUSTING! If you are comfortable with your probabilities, that's all that matters. My opinion means squat.
No consideration for gains at all? Or the opportunity cost of a small gain or breaking even on the common when the juniors triple or more due to their own conversion?
Yes, consideration for gains, but not limited to the JPS multiplier. Common gives me additional upside, JPS give me risk mitigation. Opportunity cost - no. I'm not chasing or comparing opportunities to get a higher return. I have the balance of common/JPS I want. This investment is to achieve specific goals.
try and score cheap points via name-calling and technicalities
Oh wow that's rich. Me calling you a hypocrite is "name-calling" but when you do it, it's "educating" people. LOL!! As I've said before, I am just using your tactics against you, so you know how it feels and maybe realize how ridiculous you sound. FWIW, you are the queen of technicalities!
If you think your model is so much better than mine, post it.
You are putting words in my mouth. I have never said my methods are better than any other method. Evidence of yet another thing you accuse others of CONSTANTLY, but never realize when you are doing it yourself. It's truly amazing - everything is fine when you do it, but you call out others for doing it. Or as you would post: :pot: :finger: :kettle: once again. Hypocrite.
A fourth-grader could handle the math
Well then there is no point to me explaining it then, is there? I'm pretty sure nobody here wants me to explain 4th grade math. Maybe you should just get a tutor?
Yes, we have been through this before, but you are the one who has things wrong here.
Well you are entitled to your opinion, and I'm entitled to mine. The resolution will be coming so we will see who is more "wrong" - time will dissolve opinions into cold hard facts.
Jury verdicts have no precedential power in other circuits or in other cases, and the fact that the NWS was found to have breached the implied covenant means any actions taken by FnF afterwards that don't harm shareholders relative to the NWS not a breach themselves because Judge Lamberth said reasonable investor expectations are set as of the most recent change in the contract (which was the NWS itself when it comes to future alleged breaches).
Huh? So the Jury verdict once entered as final judgement, holds less weight than a singular comment the Judge made? Not that I'm disagreeing with "reasonable investor expectations" are set based on changes that occur over time. That's fine. But that doesn't mean that every "change" that occurs is valid in the eyes of a reasonable shareholder. Any contractual change that is a violation of the shareholder agreement would still be a breach - anything that thwarts the shareholder's side of the agreement. That could be NWS 2.0 or it could be a different breach. This is so simple, I just don't understand why you don't get it.
All that means is none of your scenarios has a greater than 50% probability. In my 7 scenarios, the highest probability is 40%. That means there is at least a 60% chance that I'm wrong.
Still not getting it. I'm saying your 7 scenarios COMBINED have a less than 50% probability of being correct. What will actually happen will be something you didn't think of. You will be partially correct - i.e. senior will or won't be converted. But none of your scenarios in their entirety are likely to happen, exactly as written. IMO It's going to be something in between scenarios and perhaps incorporate solution pieces never seen before.
I tried explaining it to you before, but you just heckle whatever you don't understand. My approach here was to determine what scenarios need to happen for me to lose on this investment. Commons would have to be zero or near zero, and JPS would have to have a haircut greater than 50%. If both of those are true, I will not hit my investment goal by the end of 2026 (the numbers adjust as time progresses). I don't need to model the exact mechanics or expected values of every situation that I can't predict. Instead, I can run literally thousands of variations (common vs preferred price) to see where my "loss" line is. I know that receivership would be a total loss. There aren't many other well-known situations that will fall under my loss line.
If you only have 1 way of determining future value of your investments, that's on you. But you shouldn't assume people who have different models are somehow inferior to you, or that their methods are meaningless.
You keep saying the same things and asking the same questions, and continue to misread the situation.
The jury verdict can still be appealed, was for a pittance in damages, and has no precedential power at all.
And pray tell all-knowing KThomp - what percentage probability do you give to the Lamberth verdict getting appealed and overturned? Are you just stating a possibility, or are you assigning a probability there, hypocrite? 🙄 As for no precedential power - you couldn't be more wrong. The verdict clearly indicates the NWS breached the shareholder agreement. We've been through this before. This makes future breaches LESS likely, not more likely.
But why would those new methods be better for FnF legacy common than they were for AIG?
I don't think you understand how to account for something new happening. Your methods must only rely on what you have seen in the past? I don't know, and don't care. You are discounting a whole slew of possibilities, that together have a greater probability of occurring than your "most likely" scenario. If you think you know what is most likely to happen, great - place your bets. And if you must berate the people who evaluate the situation differently, please continue your nonsense. You aren't convincing anyone that you have a more accurate prediction method.
The old saying goes: Expect the Unexpected... But does anyone know how to do this? Does anyone have a model that assumes a significant possibility that none of their known "probabilities" will actually come to fruition?
I always give a 50% or greater probability that I'm wrong. It's like including a bet on the "field" rather than a specific outcome.
I have never, NEVER, NEVER, seen or heard of a consultant who deals with the Government that had an original thought.
That's certainly the norm in many cases. But I would argue that the GSEs have defied this norm. The initial terms with the SPS that can't be paid down as the entities return to profitability, followed by the Net Worth Swipe, and finally a "win" for shareholders that solidifies that the GSEs breached their side of the shareholder agreement by intentionally thwarting the shareholders. There are plenty of unprecedented examples for the GSEs.
Because they entered their situation differently, I believe the exit will also incorporate new methods not seen before. For example, the Sovereign Wealth Fund comes to mind. The ability to predict what has happened (before it happened) and what will happen is far more challenging that most are wanting to admit. They just want to slap a 20 year old model on the current situation and call it a day. I don't think it will follow that pattern, we're in for an interesting ride.
2) Could convert the seniors instead just as easily
Well this implies that writing them down is as easy as converting them, so you are agreeing with me that it's easily done?
Anyone (ahem, KThomp) who thinks this is going to go the exact same way as an AIG is going to be sitting there scratching their head when this is over.
Between Senator Warren grilling Pulte on the FHA delinquency rates, and Scott Turner talking about quarterbacking the GSE release, it would not surprise me at all if some of them are a little confused about the difference between FHA and FHFA. Unless they are accidentally unveiling a Federal agency restructuring that is part of a future plan.
All this will take to start the ball rolling is an EO or closed-door directive from POTUS to Bessent and Pulte - just takes Treasury and FHFA. No Congress needed, no HUD involvement needed.
- Lower the ECRF to 2.5% - Write down the Seniors - Provide the plan for release with public comment period (the plan should include:) - Converting JPS if necessary - SPO if necessary depending on how long it takes to reach capital thresholds - Exercise as few warrants as necessary to appease "taxpayers" and commit to remaining left to expire - Relist on NYSE
Agreed - I think one of the first steps will be capital requirement will get dropped to 2.5% and we can hit that natively in the next year with no secondary raise needed.
This does get interesting when I run the numbers for various amounts less than the full 79.99%. The GSEs have already paid back 301B on 191B of disbursements, or $110B profit. How much more will Treasury need? Let's say they want $81B more, so they get $191 total for double their investment. That would be quite a bit less dilution than exercising all the warrants.
If they just pulled $81B out of only FNMA and ignored FMCC - it would be something like: Legacy Common - 1.158B SPS LP - 0 Warrants - 970M SPO - 300M (just for good measure - to add $25B for capital requirements) JPS Conversion - 230M Total Common = 2.658B shares
Assuming market cap of $222.3B ($16/shr x PE of 12). This makes each share worth approx $83. Of course, they wouldn't take from just FNMA and not FMCC, so maybe it's a 50B/31B split or something which would put the shares over $100. Anything over $100 per share, and I'm not fighting anything. :)
Not where you claimed we would be, which is me only telling you to file a lawsuit or shut up. Note how that didn't actually happen, which proves your accusation that I use my signature line to shut down debate false.
The conversation went exactly how I said your arguments go. If you can't win the argument factually, you'll throw out the razzle dazzle unrelated historical bullstuff, and then when all else fails, you tell the other person to shut up. That's how the conversation ended.
At no point did you refute the main core arguments I presented: 1.) The shareholder agreement contains the covenant of good faith and fair dealing in perpetuity, and any intentional action to thwart the shareholder side of the agreement would be a breach of this covenant 2.) Future breaches are based on the action of thwarting the shareholder side of the agreement. They are not in comparison to any prior breach that has already been identified as a breach. 3.) Just because a company breached a contract previously, that does not make future breaches "okay". If that were true, companies would breach contracts all the time, pay a settlement, and then do much, much worse if that was now somehow now the "reasonable shareholder expectation" moving forward.
Since you couldn't win the argument logically, you basically told me that I'm a hypocrite for not filing my own lawsuit. Which does not in any way invalidate my points. Again, for someone that expects others to follow "logical" standards, you aren't applying those standards to yourself.
You just can't get enough argumentum ad populum, can you?
So you are saying people are not supposed to share their opinions of what may possibly happen, without also sharing a probability? Because KThomp says you need to include probability calculations or your point is invalid?! 🙄 Show me where it says every post needs to be supported by a probability or lawsuit?
I'll use your quote here because this isn't something I would normally say:
You don't get to set the rules here. Your participation is voluntary.
This carries the implicit assumption that the market is always correct and/or rational.
Agree the market is not always rational. Which leads to corrections, both large and small, without which, there would be no market. But how do you explain that we are not slowing dissolving to a nickel? Do you not agree that the investor sentiment is that there will/should be enough equity remaining for common shares to be at some multiple higher than it is today? Of course, they can be wrong. But they are looking at the same facts & circumstances that you are, but coming to a different conclusion.
How can you estimate a future share price using your purported scenarios without using probabilities? I am genuinely curious to hear the details of this type of strategy.
Treasury's return on FnF alone is already over 50% and they still haven't written off the seniors or cancelled the warrants. That contradicts your argument
Regardless of the return on FnF or AIG or any company, the Fed & Treasury are set up the way they are, and neither is set up for maximizing profits via the private sector. You saying otherwise isn't going to persuade them to set a new mission.
Something like 10% chance of 6, 30% of 8, 50% of 10, 10% of 12 is close enough. That comes out to an average of 9.2. I think Ackman's 15 is far too high: it could be accurate in 2027 but if the juniors are converted and capital is raised, those would occur sooner and thus at lower multiples.
I'd agree that the PE will likely increase over time from the initial release. However, your estimate of 9.2 is not more valid than Ackman's 15 except in your own mental model. You provided your relatively simplistic method above. Ackman provided his presentation and slides. Others can provide their rationale. We are all taking the exact same set of facts and circumstances and coming to our own conclusions. Nothing wrong with that - but pretending that you are more accurate than Ackman or anyone else? I'd need more evidence than your "I estimate it based on XYZ" method.
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