Saturday, June 03, 2023 8:23:05 PM
This scenario is a totally different beast but he doesn't see it...
Here's a quote from him:
"But I expect — and actually why is that relevant? It’s relevant because one of the remaining risks for common stockholders is dilution from an IPO. And one of the — part of the bear thesis is that the stock’s going to get issued at something approximating the current share price. And therefore, there’ll be massive dilution.
What’s interesting about that is it’s incredibly reminiscent of the commentary around if you go back and look, call it 10 or 11 years ago, circa 2010 — actually nine years ago, when general growth was making its way through the bankruptcy process, which reminds me very much of the conservatorship process and the bear case. And someone actually shorted the stock and put out a public presentation.
We had fun defending the company in that circumstance. But the bare case was the company was going to do a massive equity issuance at a very low share price. And the point we made is that as we made then and that applies here is that, as each of these sort of hurdles are addressed and achieved, so for example, the capital rule was finalized, we expect the stock prices to move significantly up on that development.
More materially, the preferred stock purchase agreements, when that gets resolved, we expect the stock prices of both companies to go up significantly. When — we have an expected date for an IPO. At a certain point in time, the government will be in the best interest. I would say we’re getting very close to that time now.
The government owns warrants on both companies. And in order — the other development which we did not mention is that the government has an RFP out for a financial adviser with a target date of hiring them sometime in the relative short term mid-November I think.
Anthony Massaro
Yes, by the end of November.
William Ackman
End of November. So you’re going to have an investment bank and adviser, whose objective is to raise the required — help the government raise the required capital that’s I think the first priority but also to do it in a way that’s least dilutive to the government that owns 79.9% of both of these companies.
So you now have the government working alongside a financial adviser that has an obligation on behalf of their clients to maximize the outcome and then what we expect to be a series of positive developments as each of these hurdles get chipped away. And so what’s fascinating is about the company, both companies is the higher the stock prices go the more the businesses are worth.
What I mean by that is, since there’s a large equity offering that will get done here and we don’t — $100 billion is not the number but something in the order of we think $25 billion, $30 million, $35 billion IPO. It’s still potentially quite dilutive that as the stock prices go up, the amount of the company that remains owned by the current shareholders increases, which again makes the company more valuable, which increases the profitability of the stock going up. And you get into this sort of upward virtuous cycle. And it’s worthwhile to take a look at the experience we have with general growth, which had a very analogous situation where there was a large equity backstop that got funded once the companies emerged from Chapter 11.
So the emergence from conservatorship will be yet another catalyst. And a listing ultimately on New York Stock Exchange or a major exchange, I think will allow the securities to be owned by a much broader array of investors.
The last point I would make is what’s interesting in the last period is that the preferred stock has been actually somewhat weak. And I think what’s going on is many of the investors that own preferred are now finally realizing that the common stock is if you will the fulcrum security.
So many distressed investors always lean toward owning kind of senior securities, I think have begun recognized that the upside here all the residual benefit will inure to the benefit of the common stockholders. And we believe that some of the very large holders of preferred have now been buying common and may even be selling off some of their preferred stock in order to acquire the common, which we think offers a more attractive risk-reward and better outcome in almost every circumstance."
FEATURED Cannabix Technologies and Omega Laboratories Inc. Provide Positive Developments on Marijuana Breathalyzer Testing • Jul 11, 2024 8:21 AM
ECGI Holdings Enhances Board with Artificial Intelligence (AI) Expert Ahead of Allon Apparel Launch • ECGI • Jul 10, 2024 8:30 AM
Avant Technologies to Meet Unmet Needs in AI Industry While Addressing Sustainability Concerns • AVAI • Jul 10, 2024 8:00 AM
Panther Minerals Inc. Launches Investor Connect AI Chatbot for Enhanced Investor Engagement and Lead Generation • PURR • Jul 9, 2024 9:00 AM
Glidelogic Corp. Becomes TikTok Shop Partner, Opening a New Chapter in E-commerce Services • GDLG • Jul 5, 2024 7:09 AM
Freedom Holdings Corporate Update; Announces Management Has Signed Letter of Intent • FHLD • Jul 3, 2024 9:00 AM