Ok I will play. Fannie Mae may need to raise significant capital to meet requirements (may), that doesn’t automatically mean catastrophic dilution for existing common shareholders. First, the government holds warrants for 79.9% of the common stock, and exercising those provides a massive capital infusion without issuing new shares to the public. Second, retained earnings from Fannie’s current and future profits can be used to build capital organically over time, reducing the need for large equity raises. Third, a recapitalization can be phased, possibly over 5+ years, allowing Fannie to build capital gradually rather than via an immediate, massive offering. Fourth, the actual amount of capital needed could be far lower than the theoretical maximum, especially if regulatory definitions shift or credit risk transfer programs are expanded. Fifth, any new equity raise would likely be structured to support and strengthen the common stock — not wipe it out — especially if the government wants to monetize its warrants at a high value. Sixth, the idea that dilution kills value ignores the basic math: if capital raised is accretive to book value and earnings, the stock can rise despite dilution. Seventh, dilution is only harmful if the new equity is sold cheaply — and with reform, Fannie could command a strong valuation. Eighth, major institutional players wouldn't be buying common shares if they thought they'd be diluted to zero. There is also US Fintech which is another wildcard. Lastly, the capital raise is the bridge to growth — not the end of the road — and common shareholders who survive it could participate in decades of compounding returns. We really don't know what this is going to look like and you are still at risk almost as much as I am, but I didn't get sued 4 times in the process, won't lose my shirt if I bottom out, and can possibly be a multi-millionaire on this just like you.
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