Fannie Mae-No Politics (FNMA)

[kthomp19]

On the basis of overpayment to the Treasury because NWS might not be legal which now once the trial is certified has precedent.

The jury verdict did not state or imply that the NWS was illegal. The Supreme Court already ruled that the NWS was legal anyway.

They stopped the sweep in 2021, but the "discovery" or the trial that determined the illegality was 2023(might not be certified till 2024).

No. The cash sweep stopped in 2019 (not 2021), and the implied covenant breach happened in 2012 (not 2023-2024).

Regardless, I would be excited to see government agree Senior prefs paid in full from previous payments, cancel Liq pref, and simply exercise warrants as part of the agreement to recap and release.

Sure you would be excited for this, but what do you think the probability is of these events happening? Personally I have it at 25%.

I can see why based on how it has gone the last 15 years you would think the government would never let go of any of it's 3 chokeholds on FF... but what do they stand to gain if they leave investors with nothing?

That depends on whether Treasury writes off the seniors and exercises the warrants or converts the seniors to commons.

In the former case, Treasury's interests are aligned with those of the common shareholders, meaning Treasury would want the common share price to be high. This is Ackman's thesis, and is why he is crossing his fingers that Treasury exercises the warrants (because the alternative is worse for common holders).

In the latter case, Treasury's interests are opposed to those of the common shareholders, meaning Treasury would actually want the (pre-reverse split) common share price to be low.

At that point, nothing would change and they would just hold both of them as they are forever at which point the preferred shares aren't worth anything either.

Agreed.