Replies to post #697695 on Fannie Mae-No Politics (FNMA)

[Potty]

They will deal with the liquidation preference and warrants by converting them to new commons - the warrants in full and then the liquidation preference to some degree

To roll that RnR forward, they may give a payout to resolve nuisance of existing JPS -- probably converting the JPS to still MORE common

Then they will issue still MORE common to new investors

At that point, I will be able to purchase all the existing common with my jar of pennies... but why would I bother?

[JosephS]

You are not taking the warrants into account. If common is worth the penny as we all say, preferred are par. Why would the common trade at a 4x premium to the preferred. With warrants, the common mkt cap is 10 billion while the preferred mkt cap is 2.5 billion.

Which one expands faster in a reorganization scenario? I don’t know. It all depends on the details of the share count. That’s why it is a poor gamble in my view. You are vastly overpaying for it without knowledge of future decisions. Decisions unlikely to be impacted by the law.

Your coins in a glass jar analogy reminded me to go check one of my brokerage accounts and I decided to go ahead and convert some loose change to shares. Although I am quite sure that we will continue our downward descent, the idea that 100% of the existing commons outstanding are "on sale by Mr. Market" for $2.5B in total seems compelling given that it represents about 45 days combined retained earnings. Likewise at approximately 7.5% of par, the outstanding jps are priced at around $2.5B.

Not a recco