Fannie Mae-No Politics (FNMA)

[Sogo]

Not wiped out, diluted out. Common shares that exist now would still exist technically after the Blueprint's implementation. But there are so many levels of dilution of commons that are built into the Blueprint that after all is said and done, commons will be worth a tiny fraction of what they would be worth if, say, the billions of NWS $ paid over the original "investment" amount were applied to recapitalize the GSEs instead of just being taken "for a big taxpayer profit."

Dilution by 4x occurs when warrants are exercised. Then another level of dilution occurs when preferreds are converted to commons. Then another level of dilution occurs when brand new shares are issued and offered on the open market to start the recapitalization. Then a final level of dilution of commons occurs when yet a 2nd capital-raising issuance of brand new shares happens a year later. That's 4 episodes of dilution, with the exercise of warrants being the most severe, and the conversion of preferreds into commons being, if i'm correct, the least severe.

If NWS overage were applied to capital and the warrants canceled, the value of commons would be probably up in that $50-125 range (according to valuations done by the real Tim Howard and others), depending on how any additional recap were executed. But after the Blueprint is executed, the pps of commons will be around $9-13, it appears.