Quote: “ what common share price do you believe is eventually conceivable with their release?” End of Quote
What you are asking for is the calculated value of the common stock if and when Fannie Mae is released out of prison. There are three types of Equity in play here, Senior Preferred Stock, Junior Preferred Stock and Common Stock. The fight is and always has been how much equity will each class of stock receive. That’s the million dollar question. It is not hard at all to calculate the Intrinsic Value of the Business. The unknown how much of that value will you receive.
EARNINGS POWER OF THE BUSINESSES:
The Value calculation should start with the number $436.1 billion. This is the Intrinsic Value of both companies businesses including the JPS, the estimated value of Fannie and Freddie.
$402.9 billion earnings power plus $33.2 billion JPS = $436.1 billion.
Fannie Mae
EARNINGS POWER OF THE BUSINESS
$263 Billion Intrinsic Value
Freddie Mac
EARNINGS POWER OF THE BUSINESS
$139.9 Billion Intrinsic Value
Fannie Mae JPS $19.1 billion par value
Freddie Mac JPS $14.1 billion par value
The amount of $402.9 billion is the calculated Intrinsic Value of the Earnings Power of both businesses combined using a Price to Earnings Ratio of 14.
THE FIGHT FOR THE EARNINGS POWER OF THE BUSINESS
Fannie Mae’s common stock outstanding 1,158,087,567
$18.8 billion net income / 1,158,087,567 = $16.23 per share of earnings,
PE Ratio of 14 x $16.23 = $227.22 per share intrinsic value.
With the WARRANTS: Fannie Mae’s common stock outstanding 1,158,087,567 diluted by the warrants at 79.9 percent adds a total of 5,761,629,686 shares outstanding…
$18.8 billion net income / 5,761,629,686 = $3.26 per share of earnings,
PE Ratio of 14 x $3.26 = $45.64 per share intrinsic value.
Transfer of Ownership Cram-Down
Explained,
Legacy Shareholders means, collectively, each person that owns common stock of the Company immediately prior to the closing of the Transaction (cram-down) which in no event shall include any of the Investors; or very few will remain afterwards maybe 1% or less.
A cram-down deal refers to a situation where an investor or creditor is forced into accepting undesirable terms in a transaction or bankruptcy proceedings.
In the case with Fannie Mae the Treasury's holding of senor preferred stock in the amount of $120.8 billion, with a liquidation preference of $199 billion.
If the Treasury converts this amount of SPS into common stock the Treasury in essence will own 99.9% of all the common stock outstanding. The number of shares outstanding depends on price per share at the time converted. The amount of shares outstanding after the cram-down does not matter at all, it's the percent ownership, a transfer of ownership from the legacy common shareholders to the Treasury. This transaction will cause the legacy common stock to vanish along with any short positions, naked short positions as well as any counterfeit common stock outstanding. Afterwards, the Treasury can do a reverse split reducing the amount in number of the new common stock outstanding to what ever amount desired.
AI
