Wednesday, April 14, 2021 5:33:39 PM
It all boils down to a disagreement over what the common shares will be worth, and to a lesser extent whether or not (and at what ratio) a junior-to-common conversion occurs.
Accusations of bias get thrown both ways, but at least personally I can say that if the prefs were to stay at current prices and the commons were to drop to $0.60 or so, I would switch all my prefs to commons (assuming no significant news). The only reason I don't own the commons is because I think the juniors will outperform from today's market prices, and that has been true for years. The pref:common ratio has never gotten high enough for me to take a significant common position, but I know the point at which I would switch.
I would recommend you develop an estimate for the future common price that takes into account the (then-expanded) share count. I posted my framework a couple of years ago, and if anything it was optimistic compared to what we know now (the letter agreement envisions up to $140B of common equity raises while I assumed $100B).
I don't think the economics support a final (post-raise) share price above $8, and I don't think there will be enough euphoria over a Supreme Court victory (which likely won't be the end of the case) to outweigh that.
(from another post)
There is no "pref board" or "common board" regardless of the desires of some. This board is the de facto place to discuss both the prefs and commons, as evidenced by post activity. It also makes sense from a practical point of view: very few events would impact the commons or juniors without affecting the other, and many investors own both. Consolidating all discussion of both makes perfect sense, and it has happened.
The name of this board being "FNMA" doesn't make it a "common board" either; if the name meant that much then any discussion of only Freddie, much of which happens here, should occur only on the FMCC board.
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