Fannie Mae-No Politics (FNMA)

[kthomp19]

So, at least we know the worst case scenario, we are in it right now.

I disagree. The senior-to-common conversion would still leave FnF around $125B short of the smallest possible core capital requirement in HERA (2.5% of balance sheet assets, or around $176B).

The subsequent capital raise would dilute the commons (both existing and Treasury) even further. Starting at your $1.41 mark, and considering that $125B worth of new capital would demand at least half of the overall equity, we're looking at around $0.70 per share. And that's if the new buyers don't insist on more than 50%, which I find unlikely.

In a senior-to-common conversion scenario I would peg $0.70 as the ceiling, and the floor would be under a quarter.