Fannie Mae-No Politics (FNMA)

[kthomp19]

The methodology in your post is flawed, so I will save my critique of it for another post. Meanwhile, I address some of the other points in this post.

Here you can see that the average P/E in the same industry in January 2018 was 22.2. So my calculation with a P/E of 15.15 is rather low and the value of the company would be higher if I had chosen 22.2, namely 293 billion dollars:

Why choose insurance? Why not use the banking sector instead, which has an average P/E of around 13?

If Calabria were to reduce Fannie Mae's footprint by 20%, the value of our shares would fall by almost the same percentage. The same for 30%, and so on. This is because the capital requirements would also be lower.

Don't forget that Calabria will have to set the capital requirements early in the process, probably before he starts reducing the companies' footprint.

This example shows that in principle it is hardly worth mentioning whether one converts the JPS into common shares at the SPO price of $16.89 or not.

I agree, because the junior holders would never accept a conversion at that rate. Given the current FNMAS:FNMA ratio, they wouldn't convert at anything above $4.75 or so.