Fannie Mae-No Politics (FNMA)

[obiterdictum]

No. it is not computed in that manner since the outstanding shares are left out. It is not made explicitly clear what type of warrant was issued, but given the financial reports, the warrant for 79.9% of the common stock is a 1:1 call warrant. In this case, if it is the case, the US Treasury pays the strike price per share to Fannie (and/or fFreddie) of .00001 per share ($46,040) before the expriation date and Fannie issues 4.604 billion shares to the US Treasury. The latter number of shares would be equivalent to 79.9% of all shares outstanding. The total shares outstanding after the exercise of the warrant would be 5.762 billion (1.158 billion plus 4.604 billion) according to Fannie Mae's 10-Qs 2013.

This will dilute the value of the common shares and decrease the price by 80%. If the price of a share before the full exercise of the warrant is 1.30, after the full exercise of the warrant the value per share will be approximately .265 per share. The US Treasury would earn .265 per coomon share and be in the money.