Replies to post #592326 on Fannie Mae-No Politics (FNMA)

[FFFacts]

Dilution prior to the SPO will not bother the SPO investors at all. And the SPO investors will want the SPO to be as dilutive as possible because it gives them a higher percentage of the commons for their money.

Also, the EPS number is irrelevant by itself; if it is unpalatably low for SPO investors for some reason, a reverse split fixes it.

These are both very important matters to new investors. If 33 billion were converted at its stated value that dilutes the existing commons a minimum of 300% each. New money would dilute even more depending on the terms. If commons were to declare a dividend the more shares outstanding reduces payout for everyone including new investors given the potential impact of preferred conversion even before a potential SPO.

[FOFreddie]

What do you think about a Pro-Forma BV Valuation for FMCC?

FMCC GAAP BV is $9 bn
NWS Overpayment is $11 bn
2020 Earnings est $7 bn

12/31/20 est BV with $11 bn settlement is $27 bn or $8.30
12/31/20 est BV is $4.92 without settlement
Today $2.77BV - with $0.30 increase in BV with every $1 bn of earnings or net settlement proceeds or DTA adjustment.

Add DTA of $6 bn - FMCC 2020 adj BV is $10.15

Wouldnt potential SPO be at least at BV - more likely at a multiple. Right now FMCC is earning approximately 15% ROI on Conservatorship Capital.

[Donotunderstand]

he things you listed all flow to retained earnings, which are generally a good proxy for the liquidation preference of the commons.

???

this is equity

NPV of future earnings not coverage

and yes - some might say the current price of a stock reflects - on a discounted basis the future earnings as viewed as dividends

that model has been relegated to a back shelf in the days of AMAZON and the many others who plowed years and years of profit into new activity and not dividends

indeed - during a growth period - which can be never 1 year 10 years or a ton more years - capital markets theory (U of C at least) says that if a company has a ROI on new expansion and such > Market ROI - it is foolish and undesirable to issue out cash in the form of dividends and investors are buying for price growth and WANT zero dividends