Fannie Mae-No Politics (FNMA)

[kthomp19]

What is the best and worst case scenario for jps holders?

Best case: conversion to common offer at 3x the market rate like Citi. This could lead to 2-3x par values in a few years.

Base case: divs turned back on, shares trade around par.

Worst case: recap and release falls apart and Congress legally wipes out all FnF shareholders.


You might note that court cases don't factor into this. That's because even if the Supreme Court unwinds the NWS, the seniors will still be in place (with $193B liquidation preference and rights to $19.3B of FnF's annual income) and FnF would have negative $42B in core capital, $194B short of Calabria's requirement. Treasury has to play ball to get recap and release accomplished, and if Biden wins, his Treasury secretary very well might scuttle the whole thing.

To me, this is why the shares trade at such a low price. If the election was next fall instead, the prefs would trade at a minimum of 60% of par.