Replies to post #756689 on Fannie Mae-No Politics (FNMA)

[The Man With No Name]

His ego is too big to admit he made a mistake. Simple as that. Even still, he will get the news before the plebs on this board, so he will liquidate ahead of the curve....probably crushing any "ignorance bounce". It's called insider information and insider trading....happens all the time.

[stockanalyze]

"What still confuses me is that Ackman still owns them"
hey guys, let's all ask ackman to make this hero his mentor, ackman can use some guidance.

[JOoa0ky]

His past experience with GCP is what keeps him tethered to the commons. That trade happened to turn out good for him even though he was on the "other side" of the trade.

This scenario is a totally different beast but he doesn't see it...

Here's a quote from him:
"But I expect — and actually why is that relevant? It’s relevant because one of the remaining risks for common stockholders is dilution from an IPO. And one of the — part of the bear thesis is that the stock’s going to get issued at something approximating the current share price. And therefore, there’ll be massive dilution.

What’s interesting about that is it’s incredibly reminiscent of the commentary around if you go back and look, call it 10 or 11 years ago, circa 2010 — actually nine years ago, when general growth was making its way through the bankruptcy process, which reminds me very much of the conservatorship process and the bear case. And someone actually shorted the stock and put out a public presentation.

We had fun defending the company in that circumstance. But the bare case was the company was going to do a massive equity issuance at a very low share price. And the point we made is that as we made then and that applies here is that, as each of these sort of hurdles are addressed and achieved, so for example, the capital rule was finalized, we expect the stock prices to move significantly up on that development.

More materially, the preferred stock purchase agreements, when that gets resolved, we expect the stock prices of both companies to go up significantly. When — we have an expected date for an IPO. At a certain point in time, the government will be in the best interest. I would say we’re getting very close to that time now.

The government owns warrants on both companies. And in order — the other development which we did not mention is that the government has an RFP out for a financial adviser with a target date of hiring them sometime in the relative short term mid-November I think.
Anthony Massaro
Yes, by the end of November.

William Ackman
End of November. So you’re going to have an investment bank and adviser, whose objective is to raise the required — help the government raise the required capital that’s I think the first priority but also to do it in a way that’s least dilutive to the government that owns 79.9% of both of these companies.

So you now have the government working alongside a financial adviser that has an obligation on behalf of their clients to maximize the outcome and then what we expect to be a series of positive developments as each of these hurdles get chipped away. And so what’s fascinating is about the company, both companies is the higher the stock prices go the more the businesses are worth.

What I mean by that is, since there’s a large equity offering that will get done here and we don’t — $100 billion is not the number but something in the order of we think $25 billion, $30 million, $35 billion IPO. It’s still potentially quite dilutive that as the stock prices go up, the amount of the company that remains owned by the current shareholders increases, which again makes the company more valuable, which increases the profitability of the stock going up. And you get into this sort of upward virtuous cycle. And it’s worthwhile to take a look at the experience we have with general growth, which had a very analogous situation where there was a large equity backstop that got funded once the companies emerged from Chapter 11.
So the emergence from conservatorship will be yet another catalyst. And a listing ultimately on New York Stock Exchange or a major exchange, I think will allow the securities to be owned by a much broader array of investors.

The last point I would make is what’s interesting in the last period is that the preferred stock has been actually somewhat weak. And I think what’s going on is many of the investors that own preferred are now finally realizing that the common stock is if you will the fulcrum security.
So many distressed investors always lean toward owning kind of senior securities, I think have begun recognized that the upside here all the residual benefit will inure to the benefit of the common stockholders. And we believe that some of the very large holders of preferred have now been buying common and may even be selling off some of their preferred stock in order to acquire the common, which we think offers a more attractive risk-reward and better outcome in almost every circumstance."

5 cents seems like a fair valuation. I am curious how low they shake out. I, like you, see no material upside. What still confuses me is that Ackman still owns them. Is he an idiot? Why hasnt he cut his exposure to them? He should fire someone because of this. Someone on his team should have restructuring experience. The fact he is on the wrong side post 2021 PIK common wipedown plan is fascinating to me — but he does only have a 1% position. But even that is too much of a security that has no security especially after dropping his litigation