Fannie Mae-No Politics (FNMA)

[kthomp19]

1. It is totally inconsistent with the Administration's Reform Memorandum.

Only in that it doesn't allow for competitors to enter the market. But that's a foregone conclusion anyway. There's no way to both recap FnF and have more than just those two companies in the market space. No company without a government charter can effectively compete with FnF, and no new charters can be granted without Congress.

2. It is totally non-implementable until all litigation is settled.

Neither is any other plan.

3. The litigants are almost all JPS investors who lose standing to their claims if they settle.

That's the whole point of settling the cases in the first place! This just means that the settlement of the cases will happen alongside everything else. An end to the NWS will not be announced in isolation.

4. There is no established likelihood that ANY of them will convert to common shares to vacate JPS dividend contract rights.

Moelis grants par plus some common upside to junior holders, and it only involves a partial conversion anyway. I don't think the plaintiffs would have much reason to turn down an offer of par-plus.

5. There is grave uncertainty about any recap scenario that involves a secondary offer on an Otcmarkets trading platform.

Another reason why recap/release/uplist should be done all at the same time. As a one-off, the OTC part of this shouldn't matter.

6. There is even graver uncertainty about the ability to successfully subscribe any offer for businesses that are in conservatorship.

One more point in favor of a simultaneous resolution. FHFA and Treasury each have their own reasons to not release FnF while they are undercapitalized.

7. ???

There is NO rule number seven!!

8. There is even GRAVER uncertainty that any secondary offer that is 4 to 6 times larger than the currently largest IPO in history would even be able to secure an underwriter and book runner.

Nah, concerns about the size of the equity raise are very overblown. AIG raised $22B against a future market cap of $60B or so. FnF raising $75-100B against a future market cap of $250B isn't much different in percentage terms.




What you still haven't answered is this: what is Bill Ackman so afraid of that he would buy enough prefs to be 38% prefs in his FnF portfolio? Moelis gives the commons a better return than the juniors, so whatever Ackman fears must be much worse for the commons. Why all the focus on Moelis when it isn't even the biggest threat?