Fannie Mae-No Politics (FNMA)

[kthomp19]

The capital has to make sense.

Its not just going to appear and its not going to be punitive as suggested.

Yes, it must make sense. And it's not "just going to appear".

But since Calabria has said that FnF's capital should be largely in the form of common equity, it will end up being punitive, as in dilutive. There is no way around that.

Is not relevant.

Completely, utterly, and 100% WRONG. FHFA is the one that has the power to release FnF from conservatorship, and Treasury must approve that release by section 5.3 of the SPSPAs. If one of those actors does not agree, the release never happens. Each of them must have an incentive to implement whatever plan you come up with, or else it isn't workable.

Not just that, whoever is going to buy these new common shares also has to agree, or they will just walk away and the companies will never be recapped. Why would these new buyers pay $100B for only 35% of the equity? Would you do that?

The amount of the capital raise (and the number of shares issued), and the estimate on what FnF will be worth (market cap) are the two biggest factors in determining an estimate of the future common share price. How can you make any sort of investment decision without coming up with at least ballpark numbers for those? I already showed that $100 per share causes the new buyers to walk away laughing, and that $20 makes them at least think twice.

The recap will involve the company's and management.

Nope. My last post, and those it linked to, showed that the recap will happen before release. Thus the boards and management won't have any say. You haven't even tried to refute my logic there.

the CEO/CFO have responsibilities, they just can't punt those.

Sure they have responsibilities: FHFA hasn't taken over their jobs completely. But HERA authorizes FHFA to make all decisions for FnF on behalf of the boards during conservatorship.

Public entities released from go'vt control... SOUND. Sound entails proper management.

I agree, but sound also means fully capitalized. Calabria said so himself.


(from another post)

Why issue shares at $5 valuation when the company's metrics should support $125?

Because the $125 valuation assumes no dilution. But that can't happen, because the capital has to come from somewhere (no, Treasury isn't going to magically provide it), and that capital will want something in return. Namely, common shares.

That means dilution, and the share price starts dropping. I already showed the math proving that $100 per share is far more than the new buyers will ever pay. You need to temper your expectations drastically.