Replies to post #677182 on Fannie Mae-No Politics (FNMA)

[Donotunderstand]

hhmm

assume ???

capital needed is cut in half by regulators as there is a Treasury back up anyway (or the amount needed in 5 years is 1/2 of some 15 year eventual goal)

so that is reduced big time

now

assume we get to that level from earnings - no SPO

now

why can it not be true that warrants that become shares and our shares all have a value of about 12-20 - as there is no further dilution?

Gov has 5B shares available by warrant (?? boy my memory is going) and there is 1B now - so 6B at 20B values the company at 120B total cap for a company that can earn 10B a year ?

[kthomp19]

If the govt warrants are worth 100B then by simple math of how the commons own ~20% then our share would be 25B. Divide that by ~2B shares and we have 12.50 a share.

Then if we believe KT and his valuation of FnF being around 265B... Then incoming capital will be putting in more money than what they are getting out...

Naturally, I agree. I don't think there was ever a path to the warrants being worth $100B in the open market. Half that at best.

The govt warrants actually near worthless is my stance

That makes the existing commons near-worthless by extension. Just like 4 of the 6 scenarios in last August's CBO paper.

they may exchange all of the warrants for a reduction for some of the 29B return of tax credit to FnF

I don't see this happening.

1) The $29B return as a tax credit would only "cost" Treasury $4B per year, and this wouldn't even be a cash expense, just less income tax coming in from FnF.
2) Treasury cancelling the seniors and returning the $29B (on top of ending the NWS) represents a complete capitulation on Treasury's part: that's everything the plaintiffs want. In a settlement Treasury will demand the plaintiffs to give something, and that overpayment return provides the only real flexibility. If the plaintiffs really do want to settle I would expect Treasury to successfully negotiate that $29B downward, perhaps all the way to zero. And recall that the plaintiffs encouraged Treasury to exercise the warrants when they proposed the non-cash remedy.