Fannie Mae-No Politics (FNMA)

[kthomp19]

I said in another post over the weekend that my new thesis targets a common price in the range of $40 to $50.

How is this calculated?

warrants (that would be deemed repaid collateral interest).

Wow. Three separate fallacies about the warrants in the span of three words!

1) The warrants have nothing whatsoever to do with whether or not the seniors have been repaid at 10%.
2) The warrants are not, and were never intended to be, collateral. If FnF were to fail, endangering Treasury's investment, the warrants wouldn't be worth anything at all.
3) "Interest" implies a loan, but the warrants are not a loan. Neither are the seniors, for that matter.

Not to mention the fact that both Calabria and Mnuchin (in addition to Bill Ackman and the Collins plaintiffs) have mentioned the warrants and the money Treasury would make from exercising them. If there was any indication at all that the warrants are illegal, one would think at least one of these parties would have kept their mouth shut on the matter, no?

The intriguing aspect supporting this strategy is that it is the ONLY proposal I am aware of that resolves the huge dilemma of having one, low price for current common shareholders and somehow some higher price for Newco iunvestors when each actually own the same stock.

You seem to be forgetting the very simple and likely solution of a reverse split.

It also resolves the other issue: if any new IPO is at prevailing <$2.00 market prices, the MASSIVE dilution that would create would be disqualifying.

Disqualifying? Massive dilution cannot happen by fiat?

Remember, the more dilutive the re-IPO is, the more money the new investors make. They have a direct incentive for the re-IPO to be as dilutive as possible. Treasury's warrants are the only thing that would keep these investors from pushing the common price down to pennies, and that's only because Treasury would have an incentive to prop up the common share price. Remove the warrants and that incentive is gone; at that point, it's "look out below" for the commons.