Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 3309137 times)

Jcmeg35

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12770 on: June 18, 2019, 09:32:25 AM »
@J35

you have 2 difficult claims, APA and separation of powers, and with both the merits and remedy of each claim to decide, it is like 4 claims.  you know you will have a dissent on each claim. so you have a lot of opinion writing to do, and responses to the other side once the original draft of each opinion is handed over to the other side.  plus you have 16 judges so you may have some concurring opinions.  plus you are likely to have some negotistions cum arm twisting

so this will take awhile quite apart from the political aspect you mention.  a settlement that would preempt the need for publishing the opinions seems well down the road imo, but some (in the minority) judges in the process may have that as a tactic. I tend to doubt it

@chereza - thanks for the color. That all makes sense. I guess it was a little naive to think they could kick the can but then wake up one day to see that Admin didn't follow through etc.


muscleman

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12771 on: June 19, 2019, 06:58:31 AM »
Here is my worthless prediction:
Based on the charts, I would guess the to be released treasury plan favors common far more than preferred. It kinda makes sense because that's where treasury's upside comes from after 3rd amendment is killed.
But how? Maybe preferred is converted to common at an unfavorable ratio?
I am muslceman. I have more muscle than brain!

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12772 on: June 19, 2019, 07:02:36 AM »
Here is my worthless prediction:
Based on the charts, I would guess the to be released treasury plan favors common far more than preferred. It kinda makes sense because that's where treasury's upside comes from after 3rd amendment is killed.
But how? Maybe preferred is converted to common at an unfavorable ratio?

remember that treasury cant force junior prefs to convert...unless treasury gets 2/3rds of each class to do so.  a bad conversion ratio will not help treasury get that.

the pivot point in this capital raise will be what capital level will fhfa set.  a high level means that investors will want a low re-IPO price, meaning treasury proceeds go down.  fhfa has no skin in the game, whereas treasury has all of the skin the game.

DRValue

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12773 on: June 19, 2019, 07:44:37 AM »
I really hope they listen to Tim Howard. Logic and truth in every post.
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Midas79

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12774 on: June 19, 2019, 08:04:03 AM »
the pivot point in this capital raise will be what capital level will fhfa set.  a high level means that investors will want a low re-IPO price, meaning treasury proceeds go down.  fhfa has no skin in the game, whereas treasury has all of the skin the game.

Watch out for the possibility of Treasury selling the warrants back to FnF for a fixed amount, then. If that happens then their incentive to push for lower capital levels, and thus a higher share price, disappears.

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12775 on: June 19, 2019, 08:13:00 AM »
the pivot point in this capital raise will be what capital level will fhfa set.  a high level means that investors will want a low re-IPO price, meaning treasury proceeds go down.  fhfa has no skin in the game, whereas treasury has all of the skin the game.

Watch out for the possibility of Treasury selling the warrants back to FnF for a fixed amount, then. If that happens then their incentive to push for lower capital levels, and thus a higher share price, disappears.

well that fixed amount will be less than it would otherwise be if capital levels had been lower.  any way you look at it, treasury has an incentive for lower cap levels than fhfa, which has no skin in the game, might otherwise set.  whether treasury can be an effective countervailing force on fhfa is behind my pay grade to assess.

Jcmeg35

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12776 on: June 19, 2019, 08:51:36 AM »
the pivot point in this capital raise will be what capital level will fhfa set.  a high level means that investors will want a low re-IPO price, meaning treasury proceeds go down.  fhfa has no skin in the game, whereas treasury has all of the skin the game.

Watch out for the possibility of Treasury selling the warrants back to FnF for a fixed amount, then. If that happens then their incentive to push for lower capital levels, and thus a higher share price, disappears.

@Midas, this is an interesting thought and would make it much easier for Treasury to quickly "get out" of its position. The one pushback I would have is how would FnF buyback the warrant position pre cap raise? I would think, this would only be able to take place after FnF had been fully recapped and then + some, which would have to be many years down the road. As @chereza mentions, would still require lower capital levels for Treasury to realize max value, otherwise, once we got to that point, the warrants would have a lower value.

DRValue

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12777 on: June 19, 2019, 09:16:25 AM »
the pivot point in this capital raise will be what capital level will fhfa set.  a high level means that investors will want a low re-IPO price, meaning treasury proceeds go down.  fhfa has no skin in the game, whereas treasury has all of the skin the game.

Watch out for the possibility of Treasury selling the warrants back to FnF for a fixed amount, then. If that happens then their incentive to push for lower capital levels, and thus a higher share price, disappears.

Conservator would never allow it and the business would never do it if  it leads to more dilution than the treasury retaining the warrants and selling in the market.
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Midas79

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12778 on: June 19, 2019, 09:46:33 AM »
@Midas, this is an interesting thought and would make it much easier for Treasury to quickly "get out" of its position. The one pushback I would have is how would FnF buyback the warrant position pre cap raise? I would think, this would only be able to take place after FnF had been fully recapped and then + some, which would have to be many years down the road. As @chereza mentions, would still require lower capital levels for Treasury to realize max value, otherwise, once we got to that point, the warrants would have a lower value.

FnF wouldn't buy them back before the raise, they would do it in conjunction with it. Instead of raising, say, $60B in commons with an implied warrant value of $40B, they raise $100B and give $40B of it to Treasury in exchange for the warrants.

This gives Treasury some certainty over what they would get and also gets them their money right now, allowing them to "get out" quickly as you say.

Midas79

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12779 on: June 19, 2019, 10:25:41 AM »
Conservator would never allow it and the business would never do it if  it leads to more dilution than the treasury retaining the warrants and selling in the market.

Why would FHFA care? And what do you mean by "the business would never do it"? More dilution equals more money for the new investors, not less.