The gov't could steal and extra $359 Billion from the shareholders of FMCC and FNMA according to the rough calculations below even after paying back the $187B loan. This is if the gov't sold all their shares after converting the warrants.
Value of Gov't owned FNMA warrants after conversion:
79.99% of 6B FNMA shares x $30= $143.982 Billion (low end)
79.99% of 6B FNMA shares x $45= $215.973 Billion (high end)
Value of Gov't owned FMCC warrants after conversion:
79.99% of 3.3B FMCC shares x $30= $79.19 Billion (low end)
79.99% of 3.3B FMCC shares x $45= $118.785 Billion (high end)
So the gov't could steal an extra $223.17 to 334.76 Billion on top of $212 Billion collected in the profit sweep minus the $187 Billion loan.
Previously posted here and yahoo message board:
Fannie Mae special alert - value
by timhoward717 • 10 hours ago Flag
I want to share an interesting analysis on Fannie and Freddies future value. It is exactly in line with Bill Ackmans estimate, he said it could go up 10-15 times from $3.00 which would be $30.00-$45.00 per share. I offer this for review,keep in mind this factors in the government exercising the warrants. Current headlines show that Fannie Mae reported a profit of $84 billion for 2013 however that figure is not a good way to measure company value. The $84 billion is largely driven by the recognition of deferred tax assets, a one-time event rather than a recurring one. A more accurate picture would come from excluding the $50.6 billion gain from the deferred tax assets resulting in $33.4 billion in net income for 2013.
Freddie Mac received a similar benefit from the recognition of deferred tax assets. Subtracting the $30.4 billion DTA gain from Freddie’s $48.7 billion in net income gives a figure of $18.3 billion.
Both GSEs have benefited (and could still benefit in the future) from legal settlements with the banks that sold Fannie and Freddie the defective mortgages before the crisis. But since the settlements are not going to be a perpetual part of income, I will discount 30% from future estimated income.
Applying a 10 times price to earnings ratio to these settlement-adjusted earnings would give Fannie Mae a market cap of $234 billion and Freddie Mac a market cap of $128 billion. Investors also need to factor in the warrants owned by the Treasury to acquire 79.9% of Fannie and Freddie’s common shares. With these warrants exercised, Fannie’s shares outstanding would rise to 6.0 billion and Freddie’s would rise to 3.3 billion.
Taking these market caps divided by these shares outstanding yields an estimate of $39 for Fannie Mae shares and $38.79 for Freddie Mac shares. Of course these are just rough estimates — a more realistic prediction would be that shares of the GSEs could reach the upper $30 to lower $40 range. The numbers don't lie, Keep the faith! Less
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