Replies to post #462073 on Fannie Mae-No Politics (FNMA)

[contrarian bull]

I was a shareholder in WMIH. Or whatever symbol it has used over time. I came out better than might be expected in that deal, but I bought pretty close to the bottom.

I think you are talking about a "Takeunder" where a company is reorganized as in a bankruptcy. The old share holders get credit for the value left after all debt and preferred is paid off - which often is zero when looked at purely based on assets. These takeunders rarely give credit for the value of the company as a profitable enterprise which is how common shareholders get screwed.

In the case of WMI - they didn't give preferred and bond holders full value, which helped common share holders. You still see the bond and preferred holders griping on the WMIH board about that.

In the case of fannie and freddie - they theoretically have a $3B net worth after all debt, bonds and senior/junior preferred is paid. However given the large amount they have in securities they likely would have to sell at a discount if forced to reorganize quickly, so I doubt commons would get anything.


Often treasury lets the company buy their warrants back at a discount, and that is always a possibility here. If they bought them back for say $10 and did a stock offering for $20 at the same time it could work out well.

Reorganized into an LLC like $WMIH? That didn't work out too well, just ask Washington Mutual shareholders.