analog, you couldn't be more right. FRE was taken over by the government in an effort to rescue it from further financial disaster. What these guys fail to understand is that, as the common shareholders of this company, they are last in line for claims on any of FRE's assets and there’s a very good chance their shares will become totally worthless. FRE is not under bankruptcy protection. Instead, FRE is in conservatorship to put it in a solvent condition. Anyone thinking about buying this stock needs to understand that, as part of the takeover, those preferred stock purchase agreements pumped in the IBOX here. The agreements put the government in a preferred position. Under the terms of the toxic agreement, the common and preferred shareholders bear losses ahead of the new government senior preferred shares. That means there is no guarantee that current shares will be worth anything when or if FRE comes out from under the conservatorship. The conservatorship won't eliminate the common stock like a reorganization/Chapter 11 would, but it does place common shareholders last in terms of claims on the FRE's assets.
The government now owns 80% of FRE. The common no longer get dividends on their 20% of the common and their voting rights have been stripped. No matter how well FRE does in the future, the common, now down to 20% ownership, will see NONE of it.
The pop in the shareprice is due to speculation. We saw the same thing with KMart. In KMart's SEC filings they made it crystal clear to the public that the common would be canceled and that buying it was very risky. And yet, the day Kmart emerged from Chapter 11, 91 million shares changed hands before trading was canceled! There's one born every minute.
I really hope the scavengers here played the pop for profit. Its going to be bloody soon. You are so right on when you say,
"this is just another episode of toxic financing with Uncle Sam wearing the pinkie thong"
Not many here will listen, but kudos for telling it like it is.
