Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 1950201 times)

Midas79

  • Full Member
  • ***
  • Posts: 164
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9150 on: January 10, 2018, 10:08:45 AM »
On another note, Trump is trying to get the ball rolling on an infrastructure plan. This could be his next major policy goal.

http://fortune.com/2018/01/10/us-infrastructure-spending/

Quote
Congress would need to find a way to fund an expensive infrastructure package and the cost could cause both Democrats and Republicans to oppose the legislation.

Trump wants $1 trillion. If Merkhet's idea works out, the government could potentially put up $200B and get the private sector to pledge the other $800B. If $100B comes from exercising the warrants and selling the shares (which would require recap and release to make the shares valuable enough) then the government could get a 10x multiplier on its commitment. Telling Congress that they can get $1T worth of infrastructure for $100B is a great way to build political capital, the amount Trump would lose from pissing off Rs about the GSEs notwithstanding.

In my opinion that also skews the risk/reward towards the commons. If 80% of the companies are worth $100B then the remaining 20% is worth $25B. Given the current combined market cap of around $5B that's 400% upside. FNMAS, even if you assume it later trades at a 20% premium to par due to high dividends and call protection, has 275% upside at the moment (120% of par is $30, current share price of $8, potential gain of $22, 22/8 = 2.75). Less liquid and lower dividend series have similar upsides: something like FNMAK at 95% of par has an upside of 239%.


investorG

  • Sr. Member
  • ****
  • Posts: 402
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9151 on: January 10, 2018, 10:22:13 AM »
On another note, Trump is trying to get the ball rolling on an infrastructure plan. This could be his next major policy goal.

http://fortune.com/2018/01/10/us-infrastructure-spending/

Quote
Congress would need to find a way to fund an expensive infrastructure package and the cost could cause both Democrats and Republicans to oppose the legislation.

Trump wants $1 trillion. If Merkhet's idea works out, the government could potentially put up $200B and get the private sector to pledge the other $800B. If $100B comes from exercising the warrants and selling the shares (which would require recap and release to make the shares valuable enough) then the government could get a 10x multiplier on its commitment. Telling Congress that they can get $1T worth of infrastructure for $100B is a great way to build political capital, the amount Trump would lose from pissing off Rs about the GSEs notwithstanding.

In my opinion that also skews the risk/reward towards the commons. If 80% of the companies are worth $100B then the remaining 20% is worth $25B. Given the current combined market cap of around $5B that's 400% upside. FNMAS, even if you assume it later trades at a 20% premium to par due to high dividends and call protection, has 275% upside at the moment (120% of par is $30, current share price of $8, potential gain of $22, 22/8 = 2.75). Less liquid and lower dividend series have similar upsides: something like FNMAK at 95% of par has an upside of 239%.

they just had a summit on infrastructure, it likely would have leaked by now if the intention was to use the warrants.  also, it's probably not good public policy to let monetizing warrants drive the bus on the future of housing finance rather than letting any warrant recovery value be a nice secondary benefit of whatever they ultimately decide, if it does lead to any value. i wish i am wrong but I doubt it.

SnarkyPuppy

  • Hero Member
  • *****
  • Posts: 522
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9152 on: January 10, 2018, 01:41:40 PM »
Question for those who feel that shareholders will be treated favorably in exchange for dropping lawsuits-

Is there a realistic scenario whereby all future litigation risk is removed from the government?   Even in a recap/release whereby warrants are exercised- would there not be a new set of lawsuits raised against the government regarding the legality of the warrants?

You can't say this is an unlikely outcome while simultaneously thinking that the legal route (the spefific legal route challenging HERA constitutionality) is viable.

investorG

  • Sr. Member
  • ****
  • Posts: 402
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9153 on: January 11, 2018, 04:46:50 AM »
Question for those who feel that shareholders will be treated favorably in exchange for dropping lawsuits-

Is there a realistic scenario whereby all future litigation risk is removed from the government?   Even in a recap/release whereby warrants are exercised- would there not be a new set of lawsuits raised against the government regarding the legality of the warrants?

You can't say this is an unlikely outcome while simultaneously thinking that the legal route (the spefific legal route challenging HERA constitutionality) is viable.

throwing the hera constitutional challenge is probably just a tactic to make them realize how egregious the NWS was.  if a judge is ever sympathetic to shareholders and justice, then it's more likely they reverse the sweep than throw out hera.

I don't think they could remove all future litigation risk but they could remove lots of it with a 4th amendment, imo.

Midas79

  • Full Member
  • ***
  • Posts: 164
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9154 on: January 11, 2018, 07:02:52 AM »
Question for those who feel that shareholders will be treated favorably in exchange for dropping lawsuits-

Is there a realistic scenario whereby all future litigation risk is removed from the government?   Even in a recap/release whereby warrants are exercised- would there not be a new set of lawsuits raised against the government regarding the legality of the warrants?

You can't say this is an unlikely outcome while simultaneously thinking that the legal route (the spefific legal route challenging HERA constitutionality) is viable.

I have seen this part brought up in several places. At this point I don't see why the warrants are illegal or on what grounds a lawsuit would be brought if they were exercised. Certainly anyone who bought shares after the conservatorship already knew about the existence (and thus possible future exercise) of the warrants.

orthopa

  • Sr. Member
  • ****
  • Posts: 469
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9155 on: January 11, 2018, 08:11:52 AM »
Question for those who feel that shareholders will be treated favorably in exchange for dropping lawsuits-

Is there a realistic scenario whereby all future litigation risk is removed from the government?   Even in a recap/release whereby warrants are exercised- would there not be a new set of lawsuits raised against the government regarding the legality of the warrants?

You can't say this is an unlikely outcome while simultaneously thinking that the legal route (the spefific legal route challenging HERA constitutionality) is viable.

I have seen this part brought up in several places. At this point I don't see why the warrants are illegal or on what grounds a lawsuit would be brought if they were exercised. Certainly anyone who bought shares after the conservatorship already knew about the existence (and thus possible future exercise) of the warrants.

I dont think the warrants were illegal and I think to contest the legality of the bailout you have to put yourself in the time and place of what was going on . It will be a high bar to hurdle that it was completely illegal when you had BAC, WFC, C, GS, GE, Dupont, GM, etc etc needing a bailout from the gov or WEB. Every day there was talk of a huge financial institution possible going belly up needing gov support. Gov got warrants for nearly all of those bailouts too.

The Net Worth sweep a different story, different time, different place. I believe this is also why Berk isn't contesting the original bailout. Way to difficult to say it was illegal at that time.

Im trying to think but cant think of a mechanism that could preclude any more lawsuits in a newco or recapitalized company. If the gov exercises the warrants that means common still exists. I'm sure there is something that you holding common past a certain date or after restructuring would preclude you from suing. Such as accepting shares in the new company or cash selling the shares in the open market as a payout after gov exercises warrants. Who wouldn't accept either, or sell out of shares early with full notice and carry on a lawsuit?  That doesn't of course mean you love the return you would get though.

I think treating pfd favorably is a whole different world then common treated favorably. Prf getting treated favorably would mean par and maybe a div. Common treated fairly would mean you just don't get completely wiped out. Gov could treat common fairly and newco could dilute the shit out of common holders for years and earnings could blow if new competition is substantial.


Luke 5:32

  • Hero Member
  • *****
  • Posts: 2085
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9156 on: January 12, 2018, 05:40:02 PM »
For those that may have been concerned...
from Peter A. Chapman:
Judge Sweeney's order also denies without prejudice the government's supplemental motion to dismiss (Doc. 161) that attempted to segregate shareholders based on the dates they acquired their shares.

Order attached
You are willing to give your life, if necessary, to protect a stranger... me, my bride, each one of our children. For that I thank you every single day, veterans. And I consider you a friend. "Greater love has no one than this, that someone lay down his life for his friends." John 15:13

doughishere

  • Hero Member
  • *****
  • Posts: 1182
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9157 on: January 12, 2018, 07:12:19 PM »
A copy of Judge Sweeney's scheduling order entered this afternoon is attached to this e-mail message.  Judge Sweeney directs that (a) amended complaints be filed by Feb. 22; (b) motions to dismiss be filed by June 22; (c) responses be filed by Sept. 20; and (d) the government's reply be filed by Dec. 19.  Judge Sweeney's order also denies without prejudice the government's supplemental motion to dismiss (Doc. 161) that attempted to segregate shareholders based on the dates they acquired their shares.

emily

  • Sr. Member
  • ****
  • Posts: 284
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9158 on: January 13, 2018, 08:29:15 AM »
Why does a bloomberg journalist keep focus on stock price and volume on a daily basis? I can now see the general perception on social media that he writes to manipulate stock. Very disturbing.

"High volume in some thinly traded Fannie and Freddie preferred shares today"

https://twitter.com/joelight

Luke 5:32

  • Hero Member
  • *****
  • Posts: 2085
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9159 on: January 13, 2018, 09:10:11 AM »
Why does a bloomberg journalist keep focus on stock price and volume on a daily basis? I can now see the general perception on social media that he writes to manipulate stock. Very disturbing.

"High volume in some thinly traded Fannie and Freddie preferred shares today"

https://twitter.com/joelight

I've found it useful throughout my career to spend zero mental energy on the stuff that doesn't matter.  This falls in that category.  Emily, as a college student I know you're early in your investing career, so I would like to suggest you focus your energies on what is important and nothing more.

Ironically, somebody on a message board posting something that doesn't matter to me shouldn't result in me spending time to respond to it, but in this case my response might be beneficial to you.
You are willing to give your life, if necessary, to protect a stranger... me, my bride, each one of our children. For that I thank you every single day, veterans. And I consider you a friend. "Greater love has no one than this, that someone lay down his life for his friends." John 15:13