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Monday, May 15, 2017 6:15:02 PM
That's the whole beauty of the 3.5 billion shares dilution. Let me explain.
Let's say when safe harbor releases, the remaining WAMU portfolio is worth $35 billion (the illiquid portion). 1 of 2 scenarios could happen. In the first scenario, a third party, like JPM can offer to buy it from WMILT with $35 billion cash or JPM stock. Even if that transaction is valued properly, escrow holder can still sue JPM, WMILT, or FDIC for "undervalued" sale -- because that valuation wasn't "voted" on by the open market. However, in second scenario, what if the portfolio was exchanged for value with a shell company like WMIH say with a valuation of zero. Well, if you make the exchange such that escrow holders only receive 50% of the merged company (say 200 million shares exchange), then escrow might still be able to sue WMILT/WMIH for undervalued exchange. However, if the exchange is for 95% of the merged company (say 3.5 billion shares exchange) then escrow holders will have very little ground to sue on because the new share base will be publicly priced by the market for whatever it thinks that "$35 billion portfolio" is worth and the escrow markers will be guaranteed at least 95% of that valuation (because they now have 95% of 3.7 billion shares outstanding).
So as you can see, it doesn't matter what the current 200 million WMIH is worth, nor does it matter what the future value of $6 billion NOLs is worth under upcoming Trump tax plan. As far as I'm concerned, current 200 million shares can be worth zero. However, when it dilutes itself with 3.5 billion new shares, assuming the exchange is for a multi-billion loan portfolio (say $35 billion, the new valuation of the total 3.7 billion shares will be determined by the market valuation of said loan portfolio.
Essentially, the current 200 million WMIH shareholders will be free-riding on the valuation of the new 3.5 billion shares issued -- which would be valued against the large loan portfolio that its merging with.
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