Replies to post #846170 on Fannie Mae-No Politics (FNMA)

[Sock_acct]

Forest thru trees knucklehead....

[CCSAB]

Bradford:
Very helpful, but perhaps to be fair you should consider two other scenarios (1) full SPS write off and (2) 50% SPS haircut. They are both possibilities. The rabbit hole I go down is....if Treasury is taking a haircut or full write off, then how is JPS possibly made whole and if JPS not made whole how do commons have any residual value. Obviously for this all to work Treasury wants commons to retain some reasonable value.

[DaJester]

puts a lid on the common and my valuations are lower

So we should trust your valuations over Pulte and Bessent? I think not. The only rows that should be considered from your table are the last 3 rows that show the combined valuation over $500B. Follow the words that are being spoken. Don't be so rigid that you can't update your models.

What if you are wrong about SPS being partially or fully written down? Or is it inconceivable that you would be wrong after being so right for so many years? 😉

[DaJester]

The other thing you are ignoring is how this compares to non-SPS conversion scenarios.

For example, let's take your PE of 12 row. According to you, Govt take would $254B from the 30.2B shares it would have. Let's compare it to a different scenario.

Legacy shares: 1,808,147,120
SPS: Written down to zero
Warrants: Full 79.9% exercised - 7,187,609,695 shares
JPS Converted: 951,000 additional shares (or SPO to raise money to redeem at par)
EPS: $2.91 (weighted avg of FNMA $2.67 & FMCC $3.35)
PE: 12
Govt Take: $251.4B ($147.7B FNMA + $103.7B FMCC)

The Treasury can essentially reap nearly the same value by COMPLETE write-down as they can with your version. Fewer shares all around (7.2B Treasury shares vs your proposed 30.2B), but higher intrinsic value per share. And... Far Simpler!