Replies to post #508027 on Fannie Mae-No Politics (FNMA)

[Cubshawk]

My assumption is commons come out of this no worse than $6 - but somewhere between $8-15 is the likely share price we'll see at the point of release from conservatorship. And that's the actual price - not a diluted/reverse split price for current common shareholders.

Given this isn't a liquidation scenario - preferred shares aren't going to get par until the dividend is restored. (unless you consider conversion to common shares a 'par' equivalent) Reinstatement could be years from now.

This is why in the near term I think common is the better play - the announcement of the GSE's retaining earnings should cause exuberant buying - hopefully over-exuberant. And possibly, if it works out, after riding the quick upside of common I can convert some to preferred shares for the safety/long-term dividend possibilities.

[YanksGhost]

Problem is, as I believe you would concur, that no Moelis-style recap can occur until the lawsuits are basically settled. But, to date, I have yet to see where even ONE plaintiff team has indicated a willingness to give in and settle... even in principle.

This, to me, favors a recap from organic growth (retained earnings) and a minimum of administrative action.

In such case, I would expect common shares to get a spike from the end of NWS (required, in any case for capital formation) and S/P growth at a slow growth upswing until/if Congress acts on some overall legislative reform. How fast/how much will depend on capital standards adopted by FHFA and the impact of pending litigation and whether some capital walkbacks get added to the mix.

I would prefer some speedier resolution, but in my scenario commons will continue an advance and JPS will stagnate since no dividend restoration will be possible until some capital threshold is reached that makes the GSEs release-eligible. At such time, JPS will have their eventual day, as well.

JMO.

[AllRightWamu]

What you write repeatedly has no legal basis and will lead to years of lawsuits.