Fannie Mae-No Politics (FNMA)

[HoldenWalker99]

I reiterate my common price target of $5 in light of this afternoon's developments. Patting myself on the back for my ability to foreshadow the news of the day. Good job, RuudG!

Common price target: $5/share


Assumptions:

1) NWS cancelled
2) SPS redeemed/deemed repaid
3) Overpayment offsets future payments (e.g., commitment fees)
4) 3.24% capital requirement ($175 billion)
5) Warrants exercised for 7.2 billion shares ($36 billion)
6) $60 billion retained earnings from retained earnings (incl. $6 billion existing capital buffer)
7) $200 billion valuation
8) 100% JPS conversion at IPO price
9) Requires $120 billion to be raised via common equity or new junior preferred issuance


Timeline:

1) Prior to 2/15: SPSPA modified (NWS cancelled, SPS redeemed) and target 3.24% capital requirement set; capital restoration plans start (but will already be provided to GSEs by FHFA/UST)

2) Next 6 months: Calabria confirmed, capital restoration plans approved, timeline set for JPS conversion and IPO (2H'19 and 1H'20)

3) Next 6-18 months: Calabria works with Congress to amend/remove charters (explicit guarantee, additional competitors, affordable housing, loan limits, commitment/guarantee fees, etc.) [this is the basis for the "low" $200 billion valuation above, limited footprint/scope]

4) Q4'20: new JPS issue to finalize recapitalization then release from conservatorship


Bring the ruckus!