Fannie Mae-No Politics (FNMA)

[Wise Man]

BOOM! NEW ANALYSIS DEBUNKS PAGLIARA/WedBush's $0 TARGET PRICE IN THE CASE OF DILUTION
Posted on #Fanniegate.
$FMCC
Warrant exercised. TP=$48ps
Total shares:3.1b
RIGHTS ISSUE:
Raise $31b
1 new per 3 Rights at $30ps
New TP=$36ps.
The shareholders just have to pony up $30ps. If they don't, they simply sell their Preference Subscription Rights on the market.
By the way, the new fair-value ex-Right=$34.5ps
RIGHT, theoretical value=(mkt price-offering price)/(number of rights per 1 new+1)
(36-30)/(3+1)=$1.5
In a Rights Issue, the fair-value falls 28% due to the issuance of 33% more shares but, as the shareholders are the ones buying the cheap stocks at $30, below the fair-value, they partially offset the first effect with a 15% profit on the new shares (22% of their new portfolio, it raises to 25% on day one)
THE KEY
The shareholders get to maintain their percentage of ownership on their company by participating in the Rights Issue. FMCC issued 33% more shares and the shareholders bought 33% more shares.
No crappy Govt and its chamber-investors attempting to acquire companies in every manufactured crisis.