Replies to post #813069 on Fannie Mae-No Politics (FNMA)

[stockprofitter]

It’s $34 IPO assuming warrants are excersized

[FOFreddie]

Hi Sogo - another potential source of dilution is a consensual conversion of JPS shares.

Personally I do not see any basis to assume that the UST will own less than 79.9% on the recap. The issue is whether or not the UST will be diluted when new shares are sold to raise capital. The UST Warrants do not seem to have a dilution protection provision but that could change.

Hopefully the SPS conversion risk will be eliminated by a statement or new UST Amendment - it really has to be decided by the UST which ultimately will be decided by DJT. I think the better deal for DJT would be to stick to the warrants and get the shares listed as soon as possible - make the money on multiple expansion rather than degrading your own shares with a coercive action against long suffering shareholders.

I would guess that a majority of common shareholders would vote for a fast exit and dilution protection from future capital raises rather than fighting the legality of the warrants. Ackman is a large shareholder, and he is ok with the warrants - the American Funds are also large shareholders and since they own so much in JPS they probably care more about an early EXIT. Perhaps the shareholders that oppose the warrants can bring a case in Delaware Chancery Court after exit - there is not any other current litigation regarding the warrants that I know of. In the end a majority vote rules when it comes to corporate governance - right now the FHFA has the sole rights of shareholders, but we could have a vote after exit as a condition of a Consent Decree to clear up any legal issues going forward - my prediction is that a majority of shareholders would be ok with the warrants if we can start getting dividends.

[kthomp19]

Warrants: there are many saying it would be illegal for the government to exercise them. But I haven’t seen the language of the warrants contract.

There is nothing illegal about the warrants. Those who say they are illegal, or want the warrants to go unexercised for other reasons, are primarily motivated by greed.

Yes. many say the senior preferreds will likely be deemed to have been paid off. But again, the language of that contract doesn’t necessarily require that.

That's correct. The people who say that Treasury should write off the seniors because they recouped more money than they sent out are essentially engaging in wishful thinking. There is no requirement at all for Treasury to do so. Every action Treasury has taken to this point has been to protect its equity position, including the LP ratchets in the 2017/2019/2021 letter agreements. Expecting them to suddenly reverse course and write off $340B worth of LP for nothing in return is illogical by that standard.

But What’s the total dilution if both warrants and sr preferred end up being decided against shareholders? Did someone calculate it’d be 90%

It could be anywhere from 80% (just above the warrants) to 99.9% (if Treasury wants to go max punishment mode), but John Paulson said 90% in one article and 90-95% in a TV interview, while Ackman's scenario has it at 96%. I wouldn't expect it to be less than 90%.