Fannie Mae-No Politics (FNMA)

[kthomp19]

You are saying the JPS holders should be granted 96.6% of the value of the company (33B/34.158B shares) prior to warrants being exercised?

Given that the total stated value of the juniors is $33B and the market cap of the existing common is around $1.3B, yes that sounds about right.

Why?

It's all in Calabria's book. Treasury doesn't want its equity stake to rank below any other investors (i.e. the junior prefs), so the juniors would need to be offered a conversion to common in order for them to rank alongside Treasury's warrants. And the juniors cannot be forced into such a conversion so it will have to be on terms attractive to them.

The commons held the bulk of the value pre-conservatorship

That means nothing now and will mean nothing in the future.

and to just wave a wand to redistribute the ratio doesn't sit well with anyone other than JPS holders.

It would sit perfectly well with Treasury and FHFA. Recall that they nearly went through with a preferred-to-common conversion already of both the seniors and the juniors.

The only ones it doesn't sit well with are the legacy common holders, who have no voice and no vote in what happens.

And 22 P/E ratio? Where did that come from? Prior to conservatorship it hovered more around 12 if memory serves.

At the time capital is raised and/or when Treasury starts selling its common shares, I think the P/E will struggle to hit double digits.

Good job on doing the calculations I guess.

An excellent job. Not many actually go through the math when calculating their estimate of the future common share price.