Thursday, January 25, 2024 12:28:10 AM
That's not how it works at all. If Treasury converts the seniors to commons it will be able to name the conversion price. It doesn't have to depend on the market price at the time. FHFA has no reason to say no to any particular price because it doesn't owe any duties at all to common shareholders.
The liquidation preference was $293B as of the end of Q3, probably close to $300B once the 2023 10-K forms are released.
The commons have only briefly poked their heads above $5 since the start of conservatorship, in 2014 before Lamberth's initial ruling throwing the whole case out.
Given the massive liquidation preference overhang ($100B and counting more than it was in 2014) it will be hard to get back to $5, though trading momentum might get it there. But as I said above that won't really matter when it comes to how dilutive a senior-to-common conversion would be.
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