Fannie Mae-No Politics (FNMA)

[capitalismforever]

in your analysis of the common share price, and the $60bn of capital needed to be raised, you assume a static share price for the issuance of the shares --- if the 60bn is raised at higher or lower stock prices than current, it shifts the relative ownership percentages relative to now, which has a dramatic impact on the valuation of the currently floated shares. if they go the reform, recap, and release route then there will likely be a period of time where the shares rise before the equity is issued --- especially if they are trying to maximize warrant values.

You must have missed the conversation about this. No, I didn't assume a static share price. I assumed a static capital requirement. I initially didn't give any thorough explanations because I assumed everyone would understand the math, because I do. Apparently they didn't, so I re-wrote it including explanations of what I was doing. Here it is again:

$12.31b NI x 14 PE = $172.34b Mkt cap
$172.34b - $19.13b pfd's = $153.21b mkt cap attributable to commons
$80b recap ASSUMPTION
$80b / $153.21b = 52.22% weight of recap
100% - 52.22% = 47.78% weight value of total shares
5.893b current shares out / 47.78% = 12.33b total shares required
$153.21b / 12.33b = $12.43 pps valuation

b) unless the preferred is called or tendered, which is possible, you must admit your analysis of only and exactly 20bn of equity value remaining in a liquidation of cash flows over many years is merely a guess with wild variance around that guess. again, outside of a call or tender, the odds of the wind-down equity value hitting someone's precise guess to give jr preferreds 100pct and common 0 is possible but very low.

It's simple math and only a coincidence that the resulting equity equals the combined value of preferreds. Currently there is $37b of equity which partially consists of $33.5b of deferred tax assets that were calculated using the effective tax rate of 32.8%. If a 15% corporate tax plan is passed, deferred taxes will be marked down $18b. (($33.5b / 32.8%) * (15%)) = New DTA @ 15%. $37b of equity - $18b impairment charge = $19b. It's only a coincidence that amount is similar to preferred value. A coincidence I'll be more than happy to take.