Replies to post #508443 on Fannie Mae-No Politics (FNMA)

[kthomp19]

Seems farfetched to me for the reason the moment the NWS is announced to be undone, the prefs will immediately trade at par, or close to, and the commons will see this upside too

Only if the end of the NWS is announced in isolation. If, instead, FHFA and Treasury announce an end to the NWS, the retirement of the seniors, a junior conversion (or not), a warrant exercise (or sale back to FnF), and a secondary offering at $X, then juniors will likely go to 70-80% of par and the commons will go to a little under $X (due to execution risk).

so to determine what the conversion ratio for pref to common is upfront of the undo, is almost impossible

But we can safely assume that it will be at a premium to whatever the market ratio is, so in this case owning prefs now is a cheaper way to own commons later, compared to just buying the commons now. This is what I mean when I say that the juniors have an embedded call option on the commons.

IMHO the most likely outcome will be the prefs receive their missed payments and commons get the upside of price appreciation of the commons and dividends are restored immediately

I don't think juniors get their dividends turned back on until the companies are fully recapped. However, at this point we don't know how many new common shares will be offered, or at what price.

they will start new lawsuits again over the actions about to be taken if improper

Please don't join the crowd that threatens lawsuits at every turn, but cannot say exactly what law is broken. What action would trigger these lawsuits of yours, and what reason do you have to believe that they will ultimately succeed?

pay for damages caused

Pay whom, and how much?

And the better the outcome is for prefs and commons, the less problems FnF face in the future.

Maybe. I don't think common shareholders have a leg to stand on, or more literally a cognizable legal claim, in the case of a secondary offering at a price that isn't palatable to some of them (say $4).