Fannie Mae-No Politics (FNMA)

[imtheshadow]

cap, I'm using a simplified example to illustrate a point. If a company has a perceived market value of $180B based on NI x PE ratio, and they have approximately 6B shares, the market (not book) value is $30/sh and they should be able to raise money close to that value. If they do raise $100B to recap (or whatever amount), the amount raised is added to both the market and book value ... and the market (not book) value will still be close to $30/sh. As I mentioned before, the key assumption is the NI x PE ratio in determining the market value per share and the price used to complete a recap offering. In short, I can't follow your METHOD below that says it will take 19.34B shares to raise $112B.



$111.836b is what is required to make them whole again.

$12.31b NI x 14.62 PE = $179.97b Mkt cap
$179.97b - $19.13b pfd's = $160.84 mkt cap attributable to commons
$111.836b recap assumption
$111.836b / $160.84 = 69.53% weight of recap
100% - 69.53% = 30.47% weight value of total shares
5.893b current shares out / 30.47% = 19.34b total shares required
$160.84b / 19.34b = $8.32 pps valuation

Like an IPO, new issues are done on discount to value to encourage transactions = $8.32 - 10% = $7.49 pps