Replies to post #772731 on Fannie Mae-No Politics (FNMA)

[Rodney5]

Quote: “ Commons would go up in price, reducing dilution. Which would mean less $$$ for the Biden admin from the recap/release "deal". End of Quote

Kindly, explain to me how the common stock going up in price would reduce dilution and less money?

The strike price of the warrants if exercised has absolutely nothing to do with the value of Fannie Mae’s business. The SPS conversion to common stock at whatever price has absolutely nothing to do with the value of Fannie Mae’s business.

Stock price has nothing to do with the intrinsic value of the earnings power of the business.

Please explain to me your reasoning

Quote” Has anyone here ever considered that a decline in commons' stock price is in the government's best interest? “ End of Quote

[FOFreddie]

Hi LuLeVan - do you have a link for the Susan Wachter reference? She seems important since she is part of UPenn which has the JB connections and because she has longstanding respect regarding Housing Policy.

[kthomp19]

Has anyone here ever considered that a decline in commons' stock price is in the government's best interest?

I don't see how this could be directly true, but if Treasury decides to go through with a senior-to-common conversion (FHFA would have no reason to say no) and it occurs at the then-prevailing market price (which doesn't have to happen), then a low price would be good for Treasury.

Some people, like Ackman, bought FnF commons because they believed Treasury would try to prop up the price of the commons to make the warrants more valuable; they would be on the same side. A senior-to-common conversion turns that prospect on its head because it would pit Treasury against current common shareholders. And we all know who would win that power struggle.