Replies to post #689555 on Fannie Mae-No Politics (FNMA)

[FFFacts]

Liquidation preference on jps or common is meaningless right now because of the SPS. Both common and jps as it stands right now are screwed. Under certain scenarios common can outperform preferred, I have long said that. Issue right now is why would treasury care about warrants when there is effectively no common equity at all treasury owns the entire net worth and then some.

[JOoa0ky]

The prefs will most likely not have their divs restarted... The most likely scenario would be to convert to commons near par value. The amount of exchange is up in the wind... Anyone's guess is as good as mine.

IMO, the conversion is very likely because it lessens the amount the fork lift of a capital raise has to do.

When a company issues pref shares, they pocket the money and then record a liability for the exact amount they issued. This is a networth neutral transaction. Unfortunately due to the NWS, the liability is still there but the asset is now gone. Therefore keeping the prefs around right now is contributing to a 30 something billion deficit.

Of course they could always opt to not convert the prefs and leave the deficit but you would have to IPO an additional 30B+ to make up for it. The conversion is just 'easier' IMO.

Prior to SCOTUS the price of the prefs were not worth the risk IMO because it would be like a 4x return... but right now with them floating around 1.50 each its about a 16x return. Its currently a better 'value' at the moment.

So you think they're going to get rich off both? Come on man!
One will have to go away. Probably cheaper to buy out the 20.1% commons than all the prefs. They can also doom dividends for all commons and prefs, if they do, commons will have more price upside since prefs have 2 things going for'em : liquidation pref and dividends. The pref prospectus flyers state very clearly that the companies, if in financial straights, can suspend dividends indefinitely. So where does that leave each class? My bet is any news regarding a lengthened protracted stop of divivdends will hurt the prefs more.

I said months ago before Collins that prefs have a long, long wait for dividends. Conversion? Maybe when certain prefs hit close to the common price (1 for 1) it was never going to be 10, 20 commons for one pref, not when the greedy azz's in charge have those warrants to protect the value of. JMHO