Fannie Mae-No Politics (FNMA)

[capitalismforever]

I am not talking about right and wrong. I am addressing your assertion that part of the reason that the value of FNMA shares will not exceed $10.00 is that the warrants will be fully exercised.

My point is that you cannot reasonably do both. You cannot execute warrants that rob, dilute or whatever verb you want too use, current and prior shareholders of 80% of their ownership, and reasonably expect to sell enough new shares to generate the needed capital. Investors are not stupid and they do not live in a vaccum. They will see how you have taken value from existing shareholders and have little or no appetite to purchase the new shares that you offer.

The only dilution that will be palatable to potential new shareholders will be dilution that benefits current shareholders. Now we can have a cogent argument about how much dilution can be billed as necessary to recap the company, but the answer to that question is DEFINITELY NOT maximum possible dilution.

I haven't seen a situation yet, especially in Congress, that doesn't account for the warrants being exercised and a large sum for recapitalization. Mulvaney Bill is one such example. Dilution to this degree happens with chapter 11 turn-arounds all the time, so I'm not as surprised as you are of the possibility. We'll soon see.