Replies to post #200179 on Fannie Mae (FNMA)

[Zargis]

I see. I just did a quick calculation of the current common divided by his total shares with this swap. I must have had a number wrong.

The swap itself, from what I understood and still do understand is that indeed it is still similar to an option contract - that someone else owns the shares and ackman can purchase them at a specific - or has - but they are not fully his as of this time, a technicalIty that allows him to full-sell off still at any time.

I understand that he would have to pay interest and more if the price goes down - however is the rest of my understandIng correct?


EDIT 're read your post. Do you mean it's like he owns 15million more shares but he actually doesn't? It's just a bet that it will go up or down?



Thank you and be well,
-zargis

[chessmaster315]

Yes. This basically means Ackman has borrowed money ("leveraged") to buy more fannie shares. It shows his committment to fannie shares.

When you are leveraged like this you can "place a bigger bet" and you win more but you also risk to lose more.

Because of fannies currently low share price, it is not marginable, at least not from my brokerage firm.

It is pretty hard to margin stocks below $5.