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Wednesday, July 29, 2020 11:24:46 PM
My baseline market cap estimate is $200-250B. FnF have made upwards of $23B per year in the past, but their earnings have been inflated by almost $8B per year for the last 8 years due to a drawdown of a $72B benefit for credit losses. Only $9B remains of that, so it will roll off early in 2021.
Thus my go-forward estimate of FnF's combined earnings is around $18B. A P/E range of 11-14 gives a rough market cap of $200-250B.
With 1.8B outstanding shares, a no-dilution gives a price range of $111.11-138.89, which I have just rounded to $125 in my calculations.
Divide by 5 for the warrants to get $25, then the capital raise will cut that by at least 2/3. Add in a junior-to-common conversion and that's where my estimate of $5 comes from.
The end result is that FnF will be holding 240B in cold hard cash...
What they are worth should be the 200-250B based on 11-14 P/E plus 240B in cold hard cash. Valuing them just based on PE is discounting the capital they will have.
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