Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 3442031 times)

muscleman

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12560 on: May 30, 2019, 10:30:10 AM »
A couple percent on the common and no movement on the prefs on this "news".

This isn't really a scoop, but it might quash some of the chatter about the recap being difficult due to its sheer size. Trump would see a $75-100B equity raise (a yuge number) as a feather in his cap.

I would just be afraid that, in order to raise that much money, Treasury and FHFA would have to promise a huge chunk of the equity to the investors. That limits the value of the warrants and pushes the outstanding commons into a corner.

i am sure they are smarter than that. If they stop NWS, and do phases equity raises, then it could work out well in a few rounds.
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cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12561 on: May 30, 2019, 10:41:07 AM »
"This isn't really a scoop, but it might quash some of the chatter about the recap being difficult due to its sheer size."

well, the recap will be VERY hard to execute due to its sheer size.  especially if treasury doesn't want to do a laydown on some of its warrants.

I've been thinking that there may be a pricing game that will go on with the common.  seems to me the common will appreciate first because i) the treasury plan is announced without numbers, and common likes what it sees, and/or ii) Collin en banc is favorable.  this within next 4 weeks.

then eventually the bankers get involved and flesh out what the offering will look like, and the common doesn't like what it sees.  and common goes down, which is fine with bankers since as @IG has mentioned, bankers will want a low selling price target.

of course if things get accelerated then this window for the common to have gone up before it goes down can become quite small, but I dont know how the bankers can do their thing before fhfa finalizes the capital rule, and that should take awhile because calabria is too busy giving interviews.

so the common for a trade...no?

allnatural

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12562 on: May 30, 2019, 10:50:02 AM »
If (big IF) the capital requirement lines up w/ FHFA's recent proposal pre-Calabria. I have common value at IPO of ~$9 if they win the Collins case (and they receive a $20-25b tax credit), and ~$7 without. This factors in 90-92% dilution (full warrant monetization, 50% of jr pfd converting to new common, and new capital via ipo), 2 years of retained earnings adjusted for commitment fee, and discounting the IPO valuation to 7.5x p/e to entice new investors.

Risk is Calabria wants more capital than the original proposal, common could get smoked with 95-98% dilution. But that would go against best interest of a) raising new private capital (# might be too large, I have it now at ~$60-$80b required via IPO) and b) maximizing treasury's warrant value.

Common isnt a horrible bet here if you believe common sense will prevail.
« Last Edit: May 30, 2019, 10:53:27 AM by allnatural »

DRValue

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12563 on: May 30, 2019, 10:59:42 AM »
Common isnt a horrible bet here if you believe common sense will prevail.

Careful now.
[E]xpedience does not license omnipotence.

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allnatural

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12564 on: May 30, 2019, 11:06:00 AM »
Pun was intended  8)

Common isnt a horrible bet here if you believe common sense will prevail.

Careful now.

beaufort

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12565 on: May 30, 2019, 11:20:44 AM »
Any Canadians holding prefs in their TFSA or RRSP? 

I know that the the common of both FnF trade in Germany on the major exchange and could be ok with CRA. 

This fellow had common and prefs in his TFSA:  https://business.financialpost.com/personal-finance/tfsa/how-about-a-big-bet-on-the-u-s-housing-market-for-your-tfsa



cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12566 on: May 30, 2019, 12:14:42 PM »
@allnatural.  I like your work...moelis-like
@beaufort. and I thought you were from South Carolina...

orthopa

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12567 on: May 30, 2019, 12:16:31 PM »
If (big IF) the capital requirement lines up w/ FHFA's recent proposal pre-Calabria. I have common value at IPO of ~$9 if they win the Collins case (and they receive a $20-25b tax credit), and ~$7 without. This factors in 90-92% dilution (full warrant monetization, 50% of jr pfd converting to new common, and new capital via ipo), 2 years of retained earnings adjusted for commitment fee, and discounting the IPO valuation to 7.5x p/e to entice new investors.

Risk is Calabria wants more capital than the original proposal, common could get smoked with 95-98% dilution. But that would go against best interest of a) raising new private capital (# might be too large, I have it now at ~$60-$80b required via IPO) and b) maximizing treasury's warrant value.

Common isnt a horrible bet here if you believe common sense will prevail.

What conversion ratio to common from preferred are you using in your assessment of the 50% converting? Ive let my feelings about the common known and you hash some of this out. If all it takes is 5-6% more dilution for the common to get "smoked" as you put it, its still enough for me to stay away.

allnatural

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12568 on: May 30, 2019, 12:23:24 PM »
Full disclosure i'm still >95% in pfds. I just think the common MAY be interesting here. I'm assuming jr pfds convert at whatever the IPO price ends up being. So in a 50/50 conversion where you get half in new pfds and half in new common, the math works out that you get .5 new shares of a new $25 pfd share w/ market rate coupon, and in the case of a ~$7 IPO, ~1.78x shares of new common, for a total package of $25/shr (PAR).

Luke 5:32

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12569 on: May 30, 2019, 12:32:54 PM »
https://twitter.com/CGasparino/status/1134179974485880832
SCOOP: Trump Admin creates timetable to release @FannieMae @FreddieMac from government control; @MarkCalabria seeking reform agreement w Treasury summer's end cease “net-worth sweep” by year's end, poss recap thru massive public offering in 2020 more NOW @FoxBusiness $FNMA $FMCC
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