Fannie Mae (FNMA)

[kthomp19]

Total wipe out of commons is not possible because this is not a bankruptcy restructure.

Half true. Wiping out the commons is not possible, but this is essentially a bankruptcy restructuring. Calabria said so.

The new investors can't just arbitrarily demand a % of the company.

They will have a minimum amount they will accept; any less than that and they just walk away, killing recap and release and making both the juniors and the commons worth very little. So yes, they actually can demand a certain % of the company. It won't be arbitrary, but it will be their demand.

The new money makes the rules. That's how restructurings work.

The capital raise will be via secondary IPO. The pie just divides accordingly. The current pie will dilute to 50% if the same number of shares outstanding is sold.

And it will dilute to 25% if 3x the number of shares outstanding it sold, and 10% if 9x. Et cetera.

For it to divide to zero... would be an obscene amount of shares.

To go all the way to zero the number of shares would have to be infinite. But there is a lot of room between here and infinity.

Also, no amount of shares is "obscene" because a reverse split can bring that number down to any level desired.

Commons + Warrants currently own roughly 30B in equity.

No, it's $20B. 1.8B existing shares plus 7.2B warrant shares makes 9B shares. That times today's closing price of $2.22 is just shy of $20B.

If you add in the 30B that will be returned and another 10B from 2 more quarters of retained earnings that is 70B in equity. Rough estimate of 240B total capital needed...

So the commons + warrants own ~29% of the future pie. The new investors can demand up to 71%

The "30B that will be returned" will only count towards capital at a rate of $4B per year if it's a tax credit as the Collins plaintiffs want.

So $20B right now, plus $4B of tax credit, plus $10B from 2 quarters of retained earnings is only $34B. That's 14% of the $243B total capital standard, leaving 86% for the new investors.

Of that 14%, 4/5 goes to Treasury, leaving 2.8% for existing commons. That's 97.2% dilution, which fits into Bove's 90-100% range.

The point i'm trying to make is these numbskulls can't assign a zero % to common shareholders.

0% isn't possible. 1-5% is, though.