Fannie Mae-No Politics (FNMA)

[kthomp19]

dont you have to separate any damages from a cramdown and the exercise of the warrants?

That depends on the claim in the lawsuit. I'm guessing it would include claims against both, in which case the drop in the share price would somehow have to be split between the two.

However, I think this is a moot point. If Treasury converts the seniors then they will likely just cancel the warrants because the warrants would be superfluous. Treasury can get whatever percentage it wants solely through the senior conversion.

My concern regarding the warrants is that I would think damages would be computed from the price of shares prior to Conservatorship which is when the warrant agreement was executed - thought?

Coincidentally, the price of the common right now is very close to what it was the day before conservatorship.

Still, I don't think this is the right comparison. I believe challenging the issuance of the warrants as a taking or illegal exaction would run into the six-year statute of limitations in the USCFC.

Regarding the cramdown - it seems that you are thinking that it is limited to the change in price on the announcement? Thoughts?

Yes, this is what I think is the case. Supreme Court precedent says that in a takings case the only consideration is what the property owner lost; what the government later gains is irrelevant. That means the shareholders would have to prove damages, and as we saw with Lamberth's case it's pretty hard to get a damage model through that assumes some hypothetical counterfactual price.