Donot - as you know we dont know any of the deal terms but we do know that the stock has hung in there during the last week. It is reasonable to assume that ANY certainty will probably cause the stock price to go up even with modest dilution. If it going to be massive dilution it is reasonable to expect that some in the market know this and prices would be lower by now.
My expectation is that there will NOT be a SPS cramdown but potentially a JPS conversion and future capital raises. My assumption is that the capital raise will be for F2 rather than the US Treasury. Even if it is for the UST - the UST has no incentive to exercise all the warrants, so my assumption is that at least 75% of the float remains implicit in the warrants. This leaves 25% of the float trading with will receive dividends. My assumption is a 4% required dividend yield and that the JPS dividends are approximately $ 1.9 bn per year. Current shares outstanding around 9 bn.
Assume USG stake at $ 500 bn - implied Valuation $ 625 bn proforma Shares outstanding 10,12.5, 15 bn - Implied share prices $62.50, $ 50 and $ 41.67.
Dividend requirement for 25% of float - $625 x .25 = $156.25 bn times 4% dividend yield = $ 6.25 bn dividends plus $ 1.8 bn for JPS or approximately $ 8 bn total in dividends leaving $ 17 bn attributable to UST stake and excess cash flow to continue to build capital.
Total speculation of course but INMHO using a dividend yield to justify the valuations claimed by Bessent, Pulte and Trump works well and would indicate that new investors will want to invest to get the dividend yield and earnings growth at a $ 625 bn valuation. Overtime the UST can sell the rest of its stake as the regulatory capital requirements are met or restructured to be more reasonable.
Total Speculation - just a framework for speculation.
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