Fannie Mae-No Politics (FNMA)

[kthomp19]

Why do you want to convert to common or why would anyone want to convert to common or invest in common if the UST can screw common investors again?

The answer to the first question is to make more money. A conversion removes the par-value ceiling on the prefs, and is part of why I think the risk-reward is heavily tilted towards the prefs at these price levels.

If the prefs stay where they are and the commons were to drop to $0.60 or so, I would prefer to own the commons.

There will be no conversion (either offered or accepted) if there is any perceived chance of FHFA and Treasury taking actions in the short-to-medium that are as deleterious to shareholders as those in 2008 and 2012. There also won't be a re-IPO in that case, and thus no recap and no release.

Putative re-IPO investors are not going to look at the government's treatment of current FnF shareholders when deciding on the likelihood they place on the government screwing shareholders again. Giving a bunch of money to current shareholders as recompense for events from 8 and 12 years ago will not reassure propsective investors at all because of the huge time lag. Not to mention that the more dilutive the re-IPO is, the more money the re-IPO investors make.