Replies to post #615685 on Fannie Mae-No Politics (FNMA)

[trunkmonk]

Massive price for commons coming. Now I know who Kao is here.

[kthomp19]

One route is the Ackman idea of a small common raise, or convertible pref, to establish a floor price. Then wait for SP to rise before doing another raise higher, rinse and repeat...

The problem with this plan is that there is no guarantee the share price rises in between. It could fall or stay flat, messing up assumptions as to the final share count. That uncertainty would keep investors away from the initial raise.

FHFA could allay such concerns by nailing down the size (and more importantly, the share count) of future capital raises, but in that case it would be better to just do it all at once.

The other route is do one big raise in coordination with the pref (junior and senior) conversions -- and be done with it

The Conservator and Treasury are deciding what happens in the Fall -- I can see how they go the second route...

The second route makes far more sense, especially with the short timeline that Calabria finds himself on. There is a good chance he will be out of his job in late January.

[TRCPA]

Potty......that was my thought at the beginning.

First group takes most risk and gets in at the ground floor prices. Second group, less risk and higher prices. And so on, until complete.