Hey Scott,
I completely agree with you. I think that any attempt at breaching the warrant agreement should incur a significant penalty.
The interesting thing is who to go after:
(1) You could argue that WMI board members are ultimately to blame, since, as per the warrant agreement, they had a fiduciary responsibility to make certain that the full faith and understanding of the warrant agreement was upheld.
However, since they had the carpet pulled out from under them, we can give them a pass for now.
(2) The FDIC as receiver of the estate should have noted the warrant agreement and handled it separately from the assets of WMB/WMBfsb. They failed to uphold their fiduciary duties by simply stripping the warrants from the litigation and handing JPM the litigation proceeds, which is clearly a violation of the good faith understanding of the warrant agreement.
(3) JPM. They are the ultimate beneficiary and, since they have a purchase/acquisition of the assets of WMI, their duties as custodians of the litigation are clearly spelled out in the warrant agreement.
Thus, we have 3 potential targets and, more accurately, all 3 above are to blame. Everyone saw "free money" on the table and decided to simply violate the covenants (or at least they are currently pretending to violate the covenants) of the warrant agreement.
There was an associated case, Mintz Vs. FDIC in a separate court, but this seems to have stalled out, since they were effectively in the wrong venue at the time.
Actually, the more I think about it, the more I like the Broadbill maneuver.
Their major thrust is to establish that the LTWs are not simple common stock warrants, but are only "warrants" in name. The basic understanding of the warrant agreement is that they are claims on the adjusted litigation recovery. The proposed payout was to be in common stock of the custodial company. Some posters here pointed out that DIME structured it this way since there were strict regulations against such large cash payouts from an S&L.
Thus, if Broadbill can reclassify us as separate from common equity interests, then we are well on our way to something much better. If we are treated as senior unsecured debt, then I think we are in the money... however the preferred securities might take it on the chin.
In my mind, the optimal choice is that JPM is told "You must honor the warrant agreement" and we all end up with JPM stock on the trigger date.
I wouldn't mind investing in Dimon's empire for a while... even though it's the "evil empire" :)
They say fortune favors the brave/foolish. I'm probably a bit of both, so fortune must love me!
Best,
Jared
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