Replies to post #690245 on Fannie Mae-No Politics (FNMA)

[trunkmonk]

30s is complete history IMO. but it keeps the dream alive i guess

[kthomp19]

So, anyone, what might the sharecount be after conversion of SPS to common?

Using the same methodology in my common price estimation framework post, FnF's combined share count after the conversion would be around 199B: 127B for Fannie and 72B for Freddie.

The math: the senior pref liquidation preference is around $230B right now, and the commons are worth $2.1B (all numbers are FnF combined). $2.1B / ($230B + $2.1B) = 0.009048.

1.8B (current share count) / 0.009048 = 199B.
199B * 1.15B (Fannie current share count) / 1.8B (FnF current combined share count) = 127B.
199B * 0.65B (Freddie current share count) / 1.8B = 72B.

Uncle is going to do all he can do maintain and also increase the value of his holdings.

A senior-to-common conversion means Treasury's interests would be opposed to, not aligned with, those of the existing common. Increasing the value of Treasury's holdings doesn't just mean a higher share price, it also means more dilution via the conversion.

With a historical median S&P price earnings ratio of 15, we could see shares in the mid-thirties at current earnings.

If "mid-thirties" means cents, perhaps. Otherwise it would take one whale of a reverse split.




(from another post)

Well, if Uncle is thinking about a conversion, it seems to me that he would need both the existing commons and a market that they trade in to make it work.

The existing commons only need to exist. They don't need to be worth more than a penny each though; a reverse split allows a reset up to any desired price.