If privatized and FMCC's profit continues to grow, the common shareholders will benefit the most. Preferred shares have a ceiling (limit) as to how high they can go based on their yield, par value, and dividends in arrears. I think (please look it up yourself) the original yield was 5-8%. Right now, the yield is around 20% and the preferred sharess' pps are increasing. Once the pps of the preferred shares reach their original par value and dividends in arrears are taken into consideration, they won't go much higher.
The common shares are also the riskiest to own at the moment.
If (a matter of when according to most) FMCC fulfills its obligation to the senior preferred shareholders (government) AND it's privatized, it will have to address dividends in arrears for the junior preferred shareholders. I'm not sure what the amount is but it could be in the billions since the preferred shareholders haven't been paid in over 4 years.
When Apple and Microsoft issued billions in bonds with yields lower than 2.5%, they were sold out. Retirement funds and insurance companies would love to get their hands on FMCC's 5-8% yield (at par value). Again, I'm not sure the exact yields but at par value they're significantly higher than treasury bonds.
A person like Paulson would want to convert some or all of his junior preferred shares to common shares because he takes risks, but there are entities that are content with a high fixed income. The middle ground (IF, IF, FMCC is privatized) is a 30-50% dilution and the government unloads some its senior preferred shares to retirement funds and insurance companies or other funds looking for fixed income.
This is new territory for me. All we're betting on as common shareholders is that FMCC will be privatized.
GLTA.
