Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 3209226 times)

SnarkyPuppy

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12370 on: May 11, 2019, 05:59:42 PM »
The largest IPO ever, Alibaba, raised 25 billion. More recently, Uber raised 8 billion. How in the world will the government raise 100 billion here (4 Alibabas)? Or even 50 billion? While I agree things are moving along, it is disconcerting that the sweep hasn't been stopped on Calabria's day 1.

Did you not hear his 25min interview?


rros

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12371 on: May 12, 2019, 12:01:59 PM »
The largest IPO ever, Alibaba, raised 25 billion. More recently, Uber raised 8 billion. How in the world will the government raise 100 billion here (4 Alibabas)? Or even 50 billion? While I agree things are moving along, it is disconcerting that the sweep hasn't been stopped on Calabria's day 1.

Did you not hear his 25min interview?
I did.

The interview raises questions. Not showing any sense of urgency upon the task at hand, believing investors will easily fund a secondary is disconcerting. The idea of achieving the capital levels he requires -in such short period of time- is incompatible with his admission that the sweep will go on for another quarter or two. FB, one of the most marketed IPOs in US history, raised 16 billion. That was for a company with growth prospects in a growing industry, as opposed to Fannie and Freddie's prospect of shrinking market share. Retaining earnings asap is imperative.

There is a profound disconnect with reality when he dismisses lawsuits to the NWS as trivial, something that will go away. This, in the face of a monumental need for raising capital. With no strong commitment to the rule of law facing possibly the largest need for capital ever for 2 US companies, something doesn't click.

It's ok to be opaque while going through the motions. But there is a difference between being opaque and not connecting with reality.

investorG

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12372 on: May 12, 2019, 02:49:21 PM »
the current decision-makers at Tsy and FHFA appear to want lower FnF share and profits over time.

if the capital requirement is ~2.5pct of total assets, that translates into ~ 125bn of capital needed.  some of this amount could come from retained earnings / additional preferred issuances, taking the theoretical amount to be raised in common stock below $100bn.   Ideally, this could be accomplished in a series of transactions, perhaps totalling 3 over 18 months - private equity infusion, re-IPO, follow-on.

ironically, the goals of releasing FnF from conservatorship and maximizing the govt's current investment appear contradictory.  in a potential deal, the more the govt receives of the pro forma value of FnF end state, the less new investors would get for their $75-100bn commitment, making it more difficult to complete a capital raise.  and vice versa.   

thus, I'm guessing calabria is not incentivized to get the common stock price juicing higher in advance of any potential capital raisings.  the moelis govt windfall amount estimates and pro forma FnF valuations are likely well too high in light of the leaders' stated goals.

good luck everyone.

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12373 on: May 12, 2019, 06:49:41 PM »
the current decision-makers at Tsy and FHFA appear to want lower FnF share and profits over time.

if the capital requirement is ~2.5pct of total assets, that translates into ~ 125bn of capital needed.  some of this amount could come from retained earnings / additional preferred issuances, taking the theoretical amount to be raised in common stock below $100bn.   Ideally, this could be accomplished in a series of transactions, perhaps totalling 3 over 18 months - private equity infusion, re-IPO, follow-on.

ironically, the goals of releasing FnF from conservatorship and maximizing the govt's current investment appear contradictory.  in a potential deal, the more the govt receives of the pro forma value of FnF end state, the less new investors would get for their $75-100bn commitment, making it more difficult to complete a capital raise.  and vice versa.   

thus, I'm guessing calabria is not incentivized to get the common stock price juicing higher in advance of any potential capital raisings.  the moelis govt windfall amount estimates and pro forma FnF valuations are likely well too high in light of the leaders' stated goals.

good luck everyone.

let's not forget that IF the NWS is to be rolled back so that treasury ends up with receipts as per original deal, there is a $25B credit due GSEs...can be in form of a credit against future taxes.  calabria should be pounding the table for this initial $25B stake in negotiations with treasury, and if he doesn't, shareholders should in demanding this in exchange for settlement.  $25B is 20% there towards capital target

Midas79

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12374 on: May 12, 2019, 07:13:05 PM »
let's not forget that IF the NWS is to be rolled back so that treasury ends up with receipts as per original deal, there is a $25B credit due GSEs...can be in form of a credit against future taxes.  calabria should be pounding the table for this initial $25B stake in negotiations with treasury, and if he doesn't, shareholders should in demanding this in exchange for settlement.  $25B is 20% there towards capital target

Two questions. Isn't it the plaintiffs involved in negotiations, with both Calabria and Mnuchin on the other side? Also, how does that tax credit help towards a recap?

What I was thinking is that the Collins plaintiffs are asking for the seniors to be extinguished and the $25B tax credit. Treasury counters with extinguishing the seniors but not granting the tax credit. The plaintiffs accept because they aren't affected by the recap being larger by $25B.

If the plaintiffs demand the $25B on top of the seniors being gone, Treasury conceding would give them everything they want. What incentive would Treasury have to take that deal?

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12375 on: May 12, 2019, 07:22:09 PM »
let's not forget that IF the NWS is to be rolled back so that treasury ends up with receipts as per original deal, there is a $25B credit due GSEs...can be in form of a credit against future taxes.  calabria should be pounding the table for this initial $25B stake in negotiations with treasury, and if he doesn't, shareholders should in demanding this in exchange for settlement.  $25B is 20% there towards capital target

Two questions. Isn't it the plaintiffs involved in negotiations, with both Calabria and Mnuchin on the other side? Also, how does that tax credit help towards a recap?

What I was thinking is that the Collins plaintiffs are asking for the seniors to be extinguished and the $25B tax credit. Treasury counters with extinguishing the seniors but not granting the tax credit. The plaintiffs accept because they aren't affected by the recap being larger by $25B.

If the plaintiffs demand the $25B on top of the seniors being gone, Treasury conceding would give them everything they want. What incentive would Treasury have to take that deal?

calabria is empowered by HERA  to act in the interests of the conservatee and fhfa.  it is plainly in interest of conservatee to have $25B in tax savings going forward, which will provide GSEs $25B in more retained earnings that can be applied to their capital target.  if collins goes Ps way then this ask would be stronger.
« Last Edit: May 12, 2019, 07:30:04 PM by cherzeca »

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12376 on: May 13, 2019, 10:33:31 AM »
FT reports that sen. brown doesn't expect bipartisan legislation re GSEs.  here is SA's blurb:  https://seekingalpha.com/news/3463049-frannie-privatization-unlikely-says-sherrod-brown-ft?dr=1#email_link

I take this as extremely good news...fhfa/treasury are able to proceed with administrative reform without the expectation that congress will gum up the works while GSEs are raising capital.  markets seems to think otherwise.

privatization is such an imprecise term.  reports that sen. brown is against "privatization" is not a negative for GSE pref sh, though market seems to think it is...because of loose usage of the term privatization.

if anyone disagrees id be interested in the reasoning

DRValue

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12377 on: May 13, 2019, 10:38:51 AM »
FT reports that sen. brown doesn't expect bipartisan legislation re GSEs.  here is SA's blurb:  https://seekingalpha.com/news/3463049-frannie-privatization-unlikely-says-sherrod-brown-ft?dr=1#email_link

I take this as extremely good news...fhfa/treasury are able to proceed with administrative reform without the expectation that congress will gum up the works while GSEs are raising capital.  markets seems to think otherwise.

privatization is such an imprecise term.  reports that sen. brown is against "privatization" is not a negative for GSE pref sh, though market seems to think it is...because of loose usage of the term privatization.

if anyone disagrees id be interested in the reasoning

I was very happy after I got through the clock bait headline as I took it to mean that congress won't pass anything major. To me it says admin recap with little congress input.

Buying more today. Seriously concentrated here, lol.
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hardincap

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12378 on: May 13, 2019, 10:39:19 AM »
Calabria specifically said he is obligated by the statute to release after recap. That is a BFD for him to say that. But, FUD like this does make it harder to raise capital, so its net negative, imo

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12379 on: May 13, 2019, 10:44:24 AM »
Calabria specifically said he is obligated by the statute to release after recap. That is a BFD for him to say that. But, FUD like this does make it harder to raise capital, so its net negative, imo

what's FUD? 

if this just means that congress doesn't do anything, and having heard that calabria considers himself obligated to restore capital, dont you think this makes institutional investors have fewer rather than more questions in the capital raising process?