I prefer my own proposed theory of government always wins. It is just like the lotto with this even if investors “win” the government is still a bigger winner. With this theory, the prime assumption is that the government wants to 1. Create value for the treasury to reduce deficit. And
2. They want to increase GDP as a 2ndary feature while maintaining stable housing market and keeping spreads the same or narrower.
So how do they raise funds for themselves? They obviously get any profit from share sales so they want higher share value. They also get dividend income when they turn divs on for commons. In order to keep the dividend respectable they need to keep share count reasonable. The final piece is that we all get taxed on sales and profits at anywhere from 15% to 40%. If you cash in $1 million in short term gains you are probably going to owe the government $350,000 if not more. Even 15% if long term gains is $150,000. My point being they get cash up front from share sales, they get dividends on shares retained, and they get 15-40% of profits from investors who eventually cash out.
With that in mind, it should be their goal to pump shares as high as possible by counting SPSA paid in full, allowing FnF to buy back 50% of the warrants for $1-2 billion, and from there sell perhaps half their stake and retain the other half. This would leave them with 1.2 billion shares of Fannie, $48B assuming they sell the other half at $40 each and another $2b puts their cash gain at $50B, They’d still harvest billions in dividends yearly, and they benefit from taxes from investors.
Keep in mind these numbers are pretty conservative. Valuation could be closer to $50-60 a share when they sell. I’d be happy if they sold 50% of warrants even at $5B to each FnF and obviously between the 2 companies they’d net $100b and still retain 33% of both companies.
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