Monday, April 01, 2024 11:11:08 AM
ALL RELEVANT INFORMATION TO DATE: Thanks to those you contributed.
WIN FOR SHAREHOLDERS and final Judgement !
Final Judgement as follows
https://storage.courtlistener.com/recap/gov.uscourts.dcd.163155/gov.uscourts.dcd.163155.421.0.pdf
Allocation of award as follows.
https://storage.courtlistener.com/recap/gov.uscourts.dcd.163155/gov.uscourts.dcd.163155.421.1.pdf
https://www.blbglaw.com/news/updates/2023-08-15-blbg-achieves-significant-trial-victory-in-helping-fannie-mae-and-freddie-mac-shareholders-recoup-612-million-in-class-action-against-us-federal-housing-finance-agency
The jury awarded Freddie Mac shareholders $312 million and Fannie Mae shareholders $299 million for a combined $612 million in damages in the first court case to decide in favor of the GSEs’ shareholders.
This is a small victory, however, as the $612 million represents an extremely small fraction of the billions in dollars in profit the GSEs have subsequently sent to the government. The question of whether the GSEs’ shareholders are entitled to redress has also had a surprisingly tortured case history, with the court’s decision seemingly antithetical to the view of the Supreme Court in Collins v. Yellen. It is likely the FHFA will appeal.
Under the Fifth Amendment, private property cannot be taken for public use by the government without just compensation. Berkley v. FHFA represents the first steps taken in 15 years to provide some financial redress for shareholders. More important, it represents the first time the courts have recognized that the net worth sweep represented a breach of contract that amounted to little more than government seizure of property. If only the same progress could be seen in unwinding the GSE conservatorships.
YOU BET YA ! Lets see what Judge Lambert decisides for FNMA JP's !! I'm in the money !
FHFA's Table 1, which shows the timing and amounts of all FnF draws from Treasury, shows that Fannie has drawn a total of $119.836B. https://www.fhfa.gov/DataTools/Downloads/Documents/HPI/Market-Data/Table_1.pdf
FHFA's Table 2, which shows the timing and amounts of all FnF dividends paid to Treasury, shows that Fannie has paid a total of $181.364B. https://www.fhfa.gov/DataTools/Downloads/Documents/HPI/Market-Data/Table_2.pdf
I think this will help everyone calculate future common and JPS values if any of these play out in release.
kthomp19
Re: trunkmonk post# 508894. Thursday, February 28, 2019 11:49:39 AM
Post# 508927 of 790756 Fannie board.
now look at it from the other side, non bizzarro side
You will have to be way more specific than this. To make a share price estimate, you need to answer the following questions:
1) What is the market cap? (for FnF combined, using combined numbers is much easier)
2) How much capital do they need to raise?
3) What proportion of the companies' equity will the new buyers insist on? (this answer should be higher than #2 divided by #1)
4) Will the warrants be exercised?
5) Will the juniors be offered a conversion? If so, will it be full or partial, and at what rate?
6) Will the seniors be converted to commons? If so, at what rate?
7) If any of #4, $5, or #6 is yes, what order do the four events occur in: junior conversion, warrant exercise, senior conversion, equity raise?
Only then can you actually make an educated estimate.
Let's start with the high end and make everything extremely optimistic.
1) $300B
2) $100B
3) 40%
4) No
5) No
6) No
7) N/A
With 1.8B existing shares, the new buyers get 1.2B so that they have 40% of the total: 1.2B / (1.2B + 1.8B) = 40%. This makes for 3B shares. $300B market cap divided by 3B shares is $100 per share. So we hit your number right on the nose, but it's the absolute highest, top-end number in this model.
However, is it even realistic? Otting said that FnF have to go from $6B in capital to $150-200B. I only used $100B just to be optimistic: this assumes two full years of retained earnings. The $300B number is also higher than any of Moelis's estimates. And this assumes no warrant exercise, meaning that if these new buyers wanted much more than 40%, neither FHFA nor Treasury would have a reason to tell them no. Speaking of Treasury, they get absolutely nothing here: seniors and warrants both get cancelled. Highly unrealistic to me, given Treasury's veto power over release. (For what it's worth, I assign a 0% probability to this scenario)
Changing #1-3 to $250B, $125B, and 66% leads to a share price of $46.30. Still pretty high, but it shows how sensitive the model is to changes on the optimistic end.
Let's toss the warrants in and see what happens:
1) $300B
2) $100B
3) 40%
4) Yes
5) No
6) No
7) Warrants exercised, then equity raise
Exercising the warrants gives 7.2B new shares, or 9B total pre-raise. The new buyers get 6B more shares: 6B / (6B + 9B) = 40%. $300B / 15B shares = $20 per share. So yes, changing #4 from No to Yes really does just straight up divide the answer by 5.
Now add in a junior conversion, with half of shares converted at 4 commons per $25 of par value (slightly above the current market ratio of 3.6:1):
1) $300B
2) $100B
3) 40%
4) Yes
5) Yes, half converted at 4 commons per $25 par share
6) No
7) Juniors converted, then warrants exercised, then equity raise
The juniors get 2.66B new shares: $33.19B / 2 (only half are converted) / $25 * 4 = 2.66B. Then Treasury gets 4 times the new total: 4 * (1.8B + 2.66B) = 17.84B. Now the new buyers get 14.87B to make 40% of the total. This works out to $300B / (1.8B + 2.66B + 17.84B + 14.87B) = $8.07 per share, and Treasury's warrants are worth $144B. This is realistic to me, and I assign a 20% probability here. (Note: the juniors actually end up at 136% of par here)
Lowering the market cap to $250B keeps the conversion and warrant shares the same, but means #3 has to be more than 40%, so I'll use 60%. Then the new buyers get 33.45B shares, and the share price is $300B / (1.8B + 2.66B + 17.84B + 33.45B) = $5.38, so Treasury's warrants are worth just shy of $96B. I think this is highly plausible, and I assign a 50% probability. The prefs end up at 107% of par.
Now let's say that the Fifth Circuit remands the Collins case back down, meaning that the government will have to settle in order to get all the cases cleared out before their timeline runs out at the end of 2020. The seniors will have to disappear, so converting them to commons makes the most sense because it doesn't involve any cash changing hands. The seniors' $193B liquidation preference (par value, if you will) dwarfs the ~$5B in current common market cap, so a senior-to-common conversion at par obliterates the commons: 5B / (5B + 193B) = 2.53% is all they retain, and that's before the equity raise! The juniors would decline any conversion by the way. If we keep #3 at 60%, commons end up with 1% of a $250B company, so their 1.8B shares are worth $1.40 each. I assign a 20% probability here.
Of course, we haven't hit the most pessimistic scenario yet.
1) $250B
2) $235B (Otting's high end minus one year of retained earnings, plus $60B from #5)
3) 99.5% (how high can you go? there's very little room for certainty equivalents here)
4) No (with #3 this high it's not worthwhile anymore)
5) No, but sold back to FnF for $60B
6) No
7) N/A
Now the current commons only get 0.5% of $250B companies, for a $1.25B valuation on their 1.8B shares. That makes $0.69 per share. Treasury makes $60B, not bad, but the best they can do if the new buyers are putting in nearly all the capital. I assign a 10% probability here. Ironically, in this case the warrants never get exercised and the seniors get cancelled!
This is where I get my final share price estimate for the commons.
20% * $8.07 + 50% * $5.38 + 20% * $1.40 + 10% * $0.69 = $4.65. This is a gain of 79% compared to a current price of $2.60 (FNMA/FMCC average)
For the prefs:
20% * $34 + 50% * $26.75 + 20% * $25 + 10% * $25 = $27.68. This is a gain of 185% compared to a current price of $9.70 for FNMAS, and a gain of 246% compared to $8 for some of the other series.
While only one thing will happen, I don't think it's prudent to just make one set of assumptions, and I have an inherent mistrust of models that do.
navycmdr
Re: trunkmonk post# 710426
Saturday, February 05, 2022 10:18:37 AM
Post# 710427 of 790758 Fannie board
Hello ? - if the GOVT is GOING to MAXIMIZE it's RETURN
it will "1st" have to "MAXIMIZE the $COMMON $SHARE $PRICE"
so it can "exercise it's warrants" (which I feel will be ELIMINATED)
Warrants were issued to "ensure LOAN repayment" - ALREADY DONE !!!
REPAYMENT and WARRANTS :
https://thetruthaboutfannieandfreddie.wordpress.com/2016/11/12/repayment-and-warrants/amp/?__twitter_impression=true
There has been much debate on whether Fannie and Freddie ever had the ability to repay the money that the Treasury forced upon them. Many in the government — and even in the media — claim that Fannie and Freddie lack the option to repay the money received from Fan/Fred by Treasury by stating that it is merely a return on investment.
However, reviewing this attached Treasury report published in 2012 it clearly states that Treasury believed then that Fan/Fred had not only the ability to repay, but also states repayment was likely.
Further, Treasury makes it clear that the warrants were merely a vehicle to recoup the investment into the entities. So, if all the money is returned to the Treasury, the warrants are pointless. This Treasury document claims nothing about “punitive terms” or “risk/reward return.” No, it clearly describes the purpose of the warrants — to recoup the original investment.
The following passage appears on page 8 of the Treasury report:
“Probability of the Enterprises and the FHLBs fulfilling the terms of their obligations – The structure of the PSPAs, with their liquidation preference over all other equity, including preferred equity, combined with the PSPAs’ restrictions on debt issuance, enhance the probability of both Fannie Mae and Freddie Mac ultimately repaying amounts owed.
Need to maintain the Enterprises’ and the FHLBs’ status as private shareholder-owned companies – Fannie Mae and Freddie Mac may emerge from conservatorship to resume independent operations, or they may emerge in some other form reflecting legislative changes to their congressional charters. Conservatorship preserves the status and claims of the preferred and common shareholders. The value of the warrants issued to the government under the terms of the PSPAs could potentially increase, thereby providing enhanced value to the taxpayers. Upon the government’s exercise of the warrants, the GSEs would be required under the terms of the PSPAs to apply the net cash proceeds to pay-down the liquidation preference of the senior preferred stock.”
The Treasury report can be found here:
https://www.treasury.gov/about/budget-performance/Documents/CJ_FY2012_GSE_508.pdf
Patswil
Re: Wingsjr post# 789415 Thursday, March 21, 2024 10:44:02 AM
Post# 789420 of 790758 Fannie board.
f6.7. Effect of Order; Injunction; Decree. If any order, injunction or decree is issued by any
court of competent jurisdiction that vacates, modifies, amends, conditions, enjoins, stays or otherwise affects the appointment of Conservator as conservator of Seller or otherwise curtails Conservator’s powers as such conservator (except in each case any order converting the conservatorship to a receivership under Section 1367(a) of the FHE Act), Purchaser may by written notice to
Conservator and Seller declare this Agreement null and void, whereupon all transfers hereunder
(including the issuance of the Senior Preferred Stock and the Warrant and any funding of the
Commitment) shall be rescinded and unwound and all obligations of the parties (other than to
effectuate such rescission and unwind) shall immediately and automatically terminate.
6.12. Non-Severability. Each of the provisions of this Agreement is integrated with and integral to the whole and shall not be severable from the remainder of the Agreement. In the event
that any provision of this Agreement, the Senior Preferred Stock or the Warrant is determined to
be illegal or unenforceable, then Purchaser may, in its sole discretion, by written notice to Conservator and Seller, declare this Agreement null and void, whereupon all transfers hereunder (including the issuance of the Senior Preferred Stock and the Warrant and any funding of the Commitment) shall be rescinded and unwound and all obligations of the parties (other than to effectuate such rescission and unwind) shall immediately and automatically terminate.
https://www.fhfa.gov/Conservatorship/Documents/Senior-Preferred-Stock-Agree/2008-9-26_SPSPA_FannieMae_RestatedAgreement_N508.pdf
WIN FOR SHAREHOLDERS and final Judgement !
Final Judgement as follows
https://storage.courtlistener.com/recap/gov.uscourts.dcd.163155/gov.uscourts.dcd.163155.421.0.pdf
Allocation of award as follows.
https://storage.courtlistener.com/recap/gov.uscourts.dcd.163155/gov.uscourts.dcd.163155.421.1.pdf
https://www.blbglaw.com/news/updates/2023-08-15-blbg-achieves-significant-trial-victory-in-helping-fannie-mae-and-freddie-mac-shareholders-recoup-612-million-in-class-action-against-us-federal-housing-finance-agency
The jury awarded Freddie Mac shareholders $312 million and Fannie Mae shareholders $299 million for a combined $612 million in damages in the first court case to decide in favor of the GSEs’ shareholders.
This is a small victory, however, as the $612 million represents an extremely small fraction of the billions in dollars in profit the GSEs have subsequently sent to the government. The question of whether the GSEs’ shareholders are entitled to redress has also had a surprisingly tortured case history, with the court’s decision seemingly antithetical to the view of the Supreme Court in Collins v. Yellen. It is likely the FHFA will appeal.
Under the Fifth Amendment, private property cannot be taken for public use by the government without just compensation. Berkley v. FHFA represents the first steps taken in 15 years to provide some financial redress for shareholders. More important, it represents the first time the courts have recognized that the net worth sweep represented a breach of contract that amounted to little more than government seizure of property. If only the same progress could be seen in unwinding the GSE conservatorships.
YOU BET YA ! Lets see what Judge Lambert decisides for FNMA JP's !! I'm in the money !
FHFA's Table 1, which shows the timing and amounts of all FnF draws from Treasury, shows that Fannie has drawn a total of $119.836B. https://www.fhfa.gov/DataTools/Downloads/Documents/HPI/Market-Data/Table_1.pdf
FHFA's Table 2, which shows the timing and amounts of all FnF dividends paid to Treasury, shows that Fannie has paid a total of $181.364B. https://www.fhfa.gov/DataTools/Downloads/Documents/HPI/Market-Data/Table_2.pdf
I think this will help everyone calculate future common and JPS values if any of these play out in release.
kthomp19
Re: trunkmonk post# 508894. Thursday, February 28, 2019 11:49:39 AM
Post# 508927 of 790756 Fannie board.
now look at it from the other side, non bizzarro side
You will have to be way more specific than this. To make a share price estimate, you need to answer the following questions:
1) What is the market cap? (for FnF combined, using combined numbers is much easier)
2) How much capital do they need to raise?
3) What proportion of the companies' equity will the new buyers insist on? (this answer should be higher than #2 divided by #1)
4) Will the warrants be exercised?
5) Will the juniors be offered a conversion? If so, will it be full or partial, and at what rate?
6) Will the seniors be converted to commons? If so, at what rate?
7) If any of #4, $5, or #6 is yes, what order do the four events occur in: junior conversion, warrant exercise, senior conversion, equity raise?
Only then can you actually make an educated estimate.
Let's start with the high end and make everything extremely optimistic.
1) $300B
2) $100B
3) 40%
4) No
5) No
6) No
7) N/A
With 1.8B existing shares, the new buyers get 1.2B so that they have 40% of the total: 1.2B / (1.2B + 1.8B) = 40%. This makes for 3B shares. $300B market cap divided by 3B shares is $100 per share. So we hit your number right on the nose, but it's the absolute highest, top-end number in this model.
However, is it even realistic? Otting said that FnF have to go from $6B in capital to $150-200B. I only used $100B just to be optimistic: this assumes two full years of retained earnings. The $300B number is also higher than any of Moelis's estimates. And this assumes no warrant exercise, meaning that if these new buyers wanted much more than 40%, neither FHFA nor Treasury would have a reason to tell them no. Speaking of Treasury, they get absolutely nothing here: seniors and warrants both get cancelled. Highly unrealistic to me, given Treasury's veto power over release. (For what it's worth, I assign a 0% probability to this scenario)
Changing #1-3 to $250B, $125B, and 66% leads to a share price of $46.30. Still pretty high, but it shows how sensitive the model is to changes on the optimistic end.
Let's toss the warrants in and see what happens:
1) $300B
2) $100B
3) 40%
4) Yes
5) No
6) No
7) Warrants exercised, then equity raise
Exercising the warrants gives 7.2B new shares, or 9B total pre-raise. The new buyers get 6B more shares: 6B / (6B + 9B) = 40%. $300B / 15B shares = $20 per share. So yes, changing #4 from No to Yes really does just straight up divide the answer by 5.
Now add in a junior conversion, with half of shares converted at 4 commons per $25 of par value (slightly above the current market ratio of 3.6:1):
1) $300B
2) $100B
3) 40%
4) Yes
5) Yes, half converted at 4 commons per $25 par share
6) No
7) Juniors converted, then warrants exercised, then equity raise
The juniors get 2.66B new shares: $33.19B / 2 (only half are converted) / $25 * 4 = 2.66B. Then Treasury gets 4 times the new total: 4 * (1.8B + 2.66B) = 17.84B. Now the new buyers get 14.87B to make 40% of the total. This works out to $300B / (1.8B + 2.66B + 17.84B + 14.87B) = $8.07 per share, and Treasury's warrants are worth $144B. This is realistic to me, and I assign a 20% probability here. (Note: the juniors actually end up at 136% of par here)
Lowering the market cap to $250B keeps the conversion and warrant shares the same, but means #3 has to be more than 40%, so I'll use 60%. Then the new buyers get 33.45B shares, and the share price is $300B / (1.8B + 2.66B + 17.84B + 33.45B) = $5.38, so Treasury's warrants are worth just shy of $96B. I think this is highly plausible, and I assign a 50% probability. The prefs end up at 107% of par.
Now let's say that the Fifth Circuit remands the Collins case back down, meaning that the government will have to settle in order to get all the cases cleared out before their timeline runs out at the end of 2020. The seniors will have to disappear, so converting them to commons makes the most sense because it doesn't involve any cash changing hands. The seniors' $193B liquidation preference (par value, if you will) dwarfs the ~$5B in current common market cap, so a senior-to-common conversion at par obliterates the commons: 5B / (5B + 193B) = 2.53% is all they retain, and that's before the equity raise! The juniors would decline any conversion by the way. If we keep #3 at 60%, commons end up with 1% of a $250B company, so their 1.8B shares are worth $1.40 each. I assign a 20% probability here.
Of course, we haven't hit the most pessimistic scenario yet.
1) $250B
2) $235B (Otting's high end minus one year of retained earnings, plus $60B from #5)
3) 99.5% (how high can you go? there's very little room for certainty equivalents here)
4) No (with #3 this high it's not worthwhile anymore)
5) No, but sold back to FnF for $60B
6) No
7) N/A
Now the current commons only get 0.5% of $250B companies, for a $1.25B valuation on their 1.8B shares. That makes $0.69 per share. Treasury makes $60B, not bad, but the best they can do if the new buyers are putting in nearly all the capital. I assign a 10% probability here. Ironically, in this case the warrants never get exercised and the seniors get cancelled!
This is where I get my final share price estimate for the commons.
20% * $8.07 + 50% * $5.38 + 20% * $1.40 + 10% * $0.69 = $4.65. This is a gain of 79% compared to a current price of $2.60 (FNMA/FMCC average)
For the prefs:
20% * $34 + 50% * $26.75 + 20% * $25 + 10% * $25 = $27.68. This is a gain of 185% compared to a current price of $9.70 for FNMAS, and a gain of 246% compared to $8 for some of the other series.
While only one thing will happen, I don't think it's prudent to just make one set of assumptions, and I have an inherent mistrust of models that do.
navycmdr
Re: trunkmonk post# 710426
Saturday, February 05, 2022 10:18:37 AM
Post# 710427 of 790758 Fannie board
Hello ? - if the GOVT is GOING to MAXIMIZE it's RETURN
it will "1st" have to "MAXIMIZE the $COMMON $SHARE $PRICE"
so it can "exercise it's warrants" (which I feel will be ELIMINATED)
Warrants were issued to "ensure LOAN repayment" - ALREADY DONE !!!
REPAYMENT and WARRANTS :
https://thetruthaboutfannieandfreddie.wordpress.com/2016/11/12/repayment-and-warrants/amp/?__twitter_impression=true
There has been much debate on whether Fannie and Freddie ever had the ability to repay the money that the Treasury forced upon them. Many in the government — and even in the media — claim that Fannie and Freddie lack the option to repay the money received from Fan/Fred by Treasury by stating that it is merely a return on investment.
However, reviewing this attached Treasury report published in 2012 it clearly states that Treasury believed then that Fan/Fred had not only the ability to repay, but also states repayment was likely.
Further, Treasury makes it clear that the warrants were merely a vehicle to recoup the investment into the entities. So, if all the money is returned to the Treasury, the warrants are pointless. This Treasury document claims nothing about “punitive terms” or “risk/reward return.” No, it clearly describes the purpose of the warrants — to recoup the original investment.
The following passage appears on page 8 of the Treasury report:
“Probability of the Enterprises and the FHLBs fulfilling the terms of their obligations – The structure of the PSPAs, with their liquidation preference over all other equity, including preferred equity, combined with the PSPAs’ restrictions on debt issuance, enhance the probability of both Fannie Mae and Freddie Mac ultimately repaying amounts owed.
Need to maintain the Enterprises’ and the FHLBs’ status as private shareholder-owned companies – Fannie Mae and Freddie Mac may emerge from conservatorship to resume independent operations, or they may emerge in some other form reflecting legislative changes to their congressional charters. Conservatorship preserves the status and claims of the preferred and common shareholders. The value of the warrants issued to the government under the terms of the PSPAs could potentially increase, thereby providing enhanced value to the taxpayers. Upon the government’s exercise of the warrants, the GSEs would be required under the terms of the PSPAs to apply the net cash proceeds to pay-down the liquidation preference of the senior preferred stock.”
The Treasury report can be found here:
https://www.treasury.gov/about/budget-performance/Documents/CJ_FY2012_GSE_508.pdf
Patswil
Re: Wingsjr post# 789415 Thursday, March 21, 2024 10:44:02 AM
Post# 789420 of 790758 Fannie board.
f6.7. Effect of Order; Injunction; Decree. If any order, injunction or decree is issued by any
court of competent jurisdiction that vacates, modifies, amends, conditions, enjoins, stays or otherwise affects the appointment of Conservator as conservator of Seller or otherwise curtails Conservator’s powers as such conservator (except in each case any order converting the conservatorship to a receivership under Section 1367(a) of the FHE Act), Purchaser may by written notice to
Conservator and Seller declare this Agreement null and void, whereupon all transfers hereunder
(including the issuance of the Senior Preferred Stock and the Warrant and any funding of the
Commitment) shall be rescinded and unwound and all obligations of the parties (other than to
effectuate such rescission and unwind) shall immediately and automatically terminate.
6.12. Non-Severability. Each of the provisions of this Agreement is integrated with and integral to the whole and shall not be severable from the remainder of the Agreement. In the event
that any provision of this Agreement, the Senior Preferred Stock or the Warrant is determined to
be illegal or unenforceable, then Purchaser may, in its sole discretion, by written notice to Conservator and Seller, declare this Agreement null and void, whereupon all transfers hereunder (including the issuance of the Senior Preferred Stock and the Warrant and any funding of the Commitment) shall be rescinded and unwound and all obligations of the parties (other than to effectuate such rescission and unwind) shall immediately and automatically terminate.
https://www.fhfa.gov/Conservatorship/Documents/Senior-Preferred-Stock-Agree/2008-9-26_SPSPA_FannieMae_RestatedAgreement_N508.pdf
Bullish
Retired at 47, Life's Good thanks to trading.......
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