Fannie Mae-No Politics (FNMA)

[kthomp19]

those two are relatively minor compared to the major factors influencing the value of a stock which include outlook, profits, supply and demand.

The things you listed all flow to retained earnings, which are generally a good proxy for the liquidation preference of the commons.

I don't understand what that means but that is irrelevant relative to the discussion of "Explain in detail how it makes a potential SPO easier to conduct."

It's relevant because it distils the value of things such as what you listed above (outlook, profits, supply and demand) into liquidation preference. This liquidation preference argument was used later to explain why SPO investors will want the existing juniors converted rather than left as-is.

Hypothetically that makes sense but it dilutes the common so the EPS comes down. That does not make the commons more valuable.

Dilution prior to the SPO will not bother the SPO investors at all. And the SPO investors will want the SPO to be as dilutive as possible because it gives them a higher percentage of the commons for their money.

Also, the EPS number is irrelevant by itself; if it is unpalatably low for SPO investors for some reason, a reverse split fixes it.

Also, the liquidation preference for the preferred would be a minor issue if SPO investors invest they expect their money to be money good for a long period of time for an add-on common stock.

I wouldn't call it a minor issue; $33B of liquidation preference is a pretty large number, and the $2B of dividend preference per year is around 9% of earnings going forward. The terminology is a matter of opinion, though.

I am still not convinced that the reasons you outline make a potential SPO easier to conduct or that it makes sense, holding all else constant.

I provided the explanation as requested. Whether or not it is convincing is out of my control.