Fannie Mae-No Politics (FNMA)

[big-yank]

Glen Bradford and I had an extensive discussion on the warrants and how they are considered. The net of it is that all the Yahoo Finance metrics assume the warrants are valid and are, thus, factored into their per share metrics. Those metrics are based on Market IQ Analysts and are the same content used by many investment analysts in their projections. So, the short answer is that the market presumes the warrants are legal and will dilute.

If the government keeps the warrants but releases Fannie, the common shares are worth $3. If the government gives up or is forced by the courts to cancel the warrants, the common shares are worth $15 until recapitalization can be effectualized... probably a 5 year process @ a $10 B income run rate, assuming it holds (which Fannie Mae, itself, says is unlikely).

The preferred shares in the latter scenario would immediately recover to about half of par in S/P but see divvies restored until some eventual point of redemption... likely on a scale starting @ 25% of prospectus payout rate and rising to 100% of coupon in year 4. Only at that point would common share dividends be anticipated, say in year 5 after release.

JMHO.