Replies to post #816232 on Fannie Mae-No Politics (FNMA)

[JSmith5]

The calculation of the share price is much simpler: if 7.2 billion shares (warrants redeemed) are worth 250 billion dollars, then one share is worth 34.72 USD. Such an approach also avoids confusion regarding a JPS conversion.

Thanks Fully Diluted - agree. Also, this would align pretty close with Ackman's estimate of about 15° Ackman (15 x 2.29).

I think HUD should have a place in the release process. After all, it strengthens the whole release team. Its job will be to make sure that the enforcement of the Fair Housing Act, which HUD was mandated by Congress to do, is anchored in the release process. Not a big deal.

The problem is that there are a lot of housing related programs with Congressionally mandated missions across the Government. DOD,BIA and others could make the case that they are stakeholders. There are enough players in this already. I completely understand where you are coming from - but the only players we need here is the President, Treasury and FHFA. And Congressional involvement should be considered radioactive by the stockholders.

Nats

[kthomp19]

The calculation of the share price is much simpler: if 7.2 billion shares (warrants redeemed) are worth 250 billion dollars, then one share is worth 34.72 USD. Such an approach also avoids confusion regarding a JPS conversion.

No, it doesn't work that way. The warrants gives Treasury 79.9% of the, ahem, Fully Diluted share count which includes all dilution from the IPO and a potential junior pref conversion. Treasury can achieve a share count far greater than 7.2B even if they write off the seniors.

If the valuation really is $330B and $264B goes to Treasury (which is 80%; the article says the warrants are worth more than $250B), that leaves $66B behind for everyone else. $25B for the IPO (article says $20-30B) means $41B for the commons and juniors combined. A junior pref conversion gives them $33B of that, leaving $8B behind for the legacy common, or around $4.44 per share.

If there is no junior pref conversion then the legacy common gets to keep more, but the market cap has to be adjusted downward by $2B (total junior pref dividends) times whatever P/E is used (looks like around 12 to get a $330B valuation). That knocks the total valuation for the common down to $306B.

Starting at $306B, $245B goes to Treasury as 80% and $25B for the IPO leaves $36B for the legacy common, or $20 per share.