Bradford, a series of points that really demonstrate the JPS retail and boutique miscalculations ...
First, JPS litigants are not and will not be looking to force a conversion to commons. FnF won’t do it. By the time Lamberth is ready to go in June 2022, FHFA won’t be in a position to do it. Berkowitz is also on record stating he looks forward to getting the dividends turned back on.
Second, the amount of potential change between a favorable Scotus ruling and a court date in Lamberth in Nune 2022 is huge. A favorable Scotus ruling could all but shut the door on any potential conversion. It is the proverbial long shot at best.
Third, Biden will most likely attempt to alter the GSE duopoly and will most likely fail, bu he will try with a new FHFA director. This will take time while the GSEs continue to retain earnings.
Fourth, I suspect the capital rule needs time to come down and go through proposal, public commentary, etc., so affordable housing is not affected by an oversized cap rule that was originally meant to shrink the GSE footprint. A new cap rule probably won’t be finalized until 2023, but maybe 2024, since a legislative approach may take place.
Fifth, Trump’s loss really torpedoed the fast recap plan.
Sixth, the liquidation preference being written to 0 affirms Ackman’s view Commons will outperform JPS and puts the whole debate to bed. SCOTUS may not do it themselves but an adjudication on remand or a settlement will provide very favorable terms of shareholders, which means warrants will be DOA because of the $300+ billion paid on the PSPA “principal” (LP to 0) and the warrants will be settled reasonably or cancelled outright as it is “collateral.”
Seventh, there is nothing beyond par and dividends after Trump lost. That door slammed shut after the loss and is not going to reopen, reflected in the 50% drop in JPS value compared to Commons, and the commentary from Tim Howard, former CFO of Fannie, who issued the very same JPS securities you and your retail and boutique friends are invested, said the JPS trade is a “quagmire.”
JPS does not much discuss these outstanding issues. If they did they’d strongly consider selling some or all JPS.
