Replies to post #723899 on Fannie Mae-No Politics (FNMA)

[kthomp19]

Most share offerings involve a pre-set number of shares and buyers bid the price up (or down) enough to clear the market.

FnF's share offering, on the other hand, will be for a pre-set amount of money and the number of shares will be variable. The whole point of my framework post from 2019 was to show how to estimate the number of total post-raise shares from (post-raise) market cap and amount of capital to be raised. You can then divide that post-raise market cap by the share count to get the per-share price at (re-)IPO time.

To hit the lowest of Thompson's capital requirements right now, FnF would have to raise over $100B (in addition to the seniors being gone). With a $250B market cap (FnF combined), investors would have to be given at least 40% of the overall shares, and would likely insist on more because they are taking on a lot of risk compared to holding cash.

They would like that percentage to be as high as possible, and the higher it goes the more shares are offered, lowering the per-share price (but keeping the new investors' total dollar equity constant or even increasing it).

Don't worry too much about really lower per-share prices; a properly sized reverse split solves that.