Replies to post #611070 on Fannie Mae (FNMA)

[RumplePigSkin]

New JPS can be offered with dividends turned on while old JPS would get nothing until buffer capital threshold was met.

Expecting more than 200% dilution in commons is not happening. It is even written in black and white on the warrant plan that FnF will need to make every effort to be listed on a national or regional exchange.

JPS is not the center of the FnF universe, especially given Sweeney went quite deep into why direct claims by JPS have no merit. Enough for other fed judges to reference for consistency = no JPS leverage with Treasury and FHFA. Careful ...

[kthomp19]

Selling new commons at an “attractive price” is needed for appreciation potential that any investor would require but the lower the share price the lower the capital raised or the higher the number of shares required and therefore more dilution.

Yes, the re-IPO share price will need to be low enough to attract the capital FHFA wants. Since the size of the raise will be fixed, investor demand will affect the share count.

So doesn’t it make sense that the secondary offering (re-ipo) needs to be higher like $5 (10b x5 = $50 billion).

I wrote this post outlining possible re-IPO common share prices under various sets of assumptions. $5 is entirely reasonable to me, though I think FnF will have to raise a lot more than $50B.

Too much dilution and they never climb out of the hole

I don't understand what this means. FnF can be recapped with a massive amount of dilution if the re-IPO investors decide they're not willing to pay more than $2 per share, and this gets them out of their capital hole just as well as a re-IPO at $5 (or any other price).