Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 3731704 times)

DRValue

  • Sr. Member
  • ****
  • Posts: 424
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12760 on: June 20, 2019, 12:40:07 AM »
Well, as you point out doing the raise and then buying the warrants may be a possibility, I guess SPO investors would see that as a massive share buyback. I agree the conservtor wouldn't have an issue with that in that order.

I thought your original post implied that treasury would no longer push for a high share price which means more dilution than exercising the warrants, something I would assume the directors wouldn't go for.

Instead of a share buyback, I see it as a cost of doing business. A reason to get Treasury to agree to the deal, since they have to approve release anyway.

Your second statement is correct, that's exactly what I was implying. What you're missing is that the directors won't have any say over it because it will happen during, and likely right at the end of, conservatorship. FHFA and Treasury hold all the cards, and neither has a fiduciary duty to shareholders. FHFA has no reason to care at what price the share offering is conducted, and if the warrants are sold for a fixed price then Treasury doesn't either. At that point the "more dilution equals more money for new investors" principle kicks in.

This is one downside scenario for the commons, especially compared to the juniors.

Calabria has said a few times that Fannie and Freddie will be left to raise the capital themselves. How much behind the scenes input treasury and fhfa have in reality is something that probably won't ever be known.

If it is left up to the co's then i don't see the need for a super low common price, especially if they have multiple years to raise capital, but we'll see. You pay your money, you take your choice.

disagree.  the entire capital raise will be multistep process and fhfa/treasury will run the show at the beginning.  at some point after the initial raise the companies will take over

We basically agree. Treasury controls nws and warrants so are largest shareholder at the table. Fnf won't decide any of what happens there and will be steered by what the warrants want.

However calabria has said milestones not timeframe, so the exact mechanics over years will likely have some flexibility imo.
[E]xpedience does not license omnipotence.

Not Investment Advice. Do Your Own Research.


cherzeca

  • Hero Member
  • *****
  • Posts: 2456
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12761 on: June 20, 2019, 06:03:12 AM »
I will say this, while there may be a roadmap with milestones and hopefully a timeline for congress before the ship sets sail, all of this is really written out of whole cloth.  not only has this type of transaction, raising $100B for massive companies to get out of conservatorship, not been done before, but the guy at the helm has utterly no experience with capital markets.  worse, Calabria clearly holds himself and his intelligence in high regard, which normally is a plus for someone with his responsibility, but given that he doesn't know what he doesn't know, this whole process is going to be white-knuckle.  I just hope the bankers do a good job.

DRValue

  • Sr. Member
  • ****
  • Posts: 424
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12762 on: June 20, 2019, 07:06:14 AM »
I will say this, while there may be a roadmap with milestones and hopefully a timeline for congress before the ship sets sail, all of this is really written out of whole cloth.  not only has this type of transaction, raising $100B for massive companies to get out of conservatorship, not been done before, but the guy at the helm has utterly no experience with capital markets.  worse, Calabria clearly holds himself and his intelligence in high regard, which normally is a plus for someone with his responsibility, but given that he doesn't know what he doesn't know, this whole process is going to be white-knuckle.  I just hope the bankers do a good job.

I do want this whole thing over now. Roll-on the release of the plan.
[E]xpedience does not license omnipotence.

Not Investment Advice. Do Your Own Research.

Luke 5:32

  • Hero Member
  • *****
  • Posts: 2652
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12763 on: June 21, 2019, 01:23:22 PM »
Roughly one more week, plus or minus, until we get the plan (hopefully).
A wise husband, a wise father, asks God for help. Don't be a prideful, self-reliant fool. "Father, lead me, 'cause I can't do this alone..." Lead Me by Sanctus Real: https://www.youtube.com/watch?v=yLr6G8Xy5uc
"Life will rise, death will die..." https://www.youtube.com/watch?v=L_uJYKoHhQo

cherzeca

  • Hero Member
  • *****
  • Posts: 2456
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12764 on: June 25, 2019, 08:25:00 AM »
watched the SBC hearing on SIFI designation.  as far as I could tell, only 6 senators showed up for it.  this should not give anyone in administration comfort that congress will pass legislation re GSEs.

ms wachtler made a lot of sense and is a voice to watch in the debate going forward
« Last Edit: June 25, 2019, 08:37:51 AM by cherzeca »

investorG

  • Hero Member
  • *****
  • Posts: 720
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12765 on: June 25, 2019, 11:02:18 AM »
watched the SBC hearing on SIFI designation.  as far as I could tell, only 6 senators showed up for it.  this should not give anyone in administration comfort that congress will pass legislation re GSEs.

ms wachtler made a lot of sense and is a voice to watch in the debate going forward

Crapo, Calabria, and the banks would like additional competitors and explicit guarantee.   Brown appears to favor the utility.  And this is before getting Maxine involved.  I'm guessing additional competitors and the utility model plans would be difficult to implement together?  And also guessing that Brown wouldn't give Crapo both things he wants for free.   

So, is it possible to go both utility and explicit guarantee to give each side one piece of what they want?

cherzeca

  • Hero Member
  • *****
  • Posts: 2456
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12766 on: June 25, 2019, 12:16:57 PM »
watched the SBC hearing on SIFI designation.  as far as I could tell, only 6 senators showed up for it.  this should not give anyone in administration comfort that congress will pass legislation re GSEs.

ms wachtler made a lot of sense and is a voice to watch in the debate going forward

Crapo, Calabria, and the banks would like additional competitors and explicit guarantee.   Brown appears to favor the utility.  And this is before getting Maxine involved.  I'm guessing additional competitors and the utility model plans would be difficult to implement together?  And also guessing that Brown wouldn't give Crapo both things he wants for free.   

So, is it possible to go both utility and explicit guarantee to give each side one piece of what they want?

utility reg and fed guaranty would be great for GSEs...which is why I dont think you can expect it from congress.  the whole bus in the republican side of the SBC is driven by tbtf banks, who would want to compete with rather than just sell to GSEs (ie sell to their affiliate in effect to get loans off books and to have friendlier purchase terms).  being a guarantor is very heavy sledding against GSEs without mbs fed backstop.  with no multiple guarantors, I see no fed backstop.

while I admit this is wishful thinking, I dont see how anything congress is doing recently related to GSEs gives calabria and the admin any hope that there will be any congressional reform. 

hardincap

  • Hero Member
  • *****
  • Posts: 744
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12767 on: June 26, 2019, 10:06:03 AM »
Quote
we know from the leaked remarks made by Acting Director Otting to the FHFA staff in mid-January that there was an administrative proposal set be announced “in two to four weeks” that “really sets a direction for what the future of housing will be in the U.S.,” and that would require raising “probably somewhere, based upon their business models today, [in the range of] $150 to $200 billion.” Something happened to derail that plan, and I believe it was a swift and fierce show of opposition by the banks and their supporters

imo craig's abrupt resignation has to be interpreted in this context. occams razor explanation is that whatever happened to derail the original plan caused him to resign. what happens now, i dont think anyone has a clue...

Luke 5:32

  • Hero Member
  • *****
  • Posts: 2652
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12768 on: June 26, 2019, 10:23:06 AM »
Quote
we know from the leaked remarks made by Acting Director Otting to the FHFA staff in mid-January that there was an administrative proposal set be announced “in two to four weeks” that “really sets a direction for what the future of housing will be in the U.S.,” and that would require raising “probably somewhere, based upon their business models today, [in the range of] $150 to $200 billion.” Something happened to derail that plan, and I believe it was a swift and fierce show of opposition by the banks and their supporters

imo craig's abrupt resignation has to be interpreted in this context. occams razor explanation is that whatever happened to derail the original plan caused him to resign. what happens now, i dont think anyone has a clue...

Well, whatever the plan is large investors are "ecstatic" about it as of June 7th.
Fannie and Freddie stockholders were ecstatic at Calabria’s statements. “It’s exactly what we laid out,” one investor said. “The goal of this president is what can be done administratively. You can see there’s a focus on getting it done.”

https://www.abalert.com/search.pl?ARTICLE=183913
A wise husband, a wise father, asks God for help. Don't be a prideful, self-reliant fool. "Father, lead me, 'cause I can't do this alone..." Lead Me by Sanctus Real: https://www.youtube.com/watch?v=yLr6G8Xy5uc
"Life will rise, death will die..." https://www.youtube.com/watch?v=L_uJYKoHhQo

hardincap

  • Hero Member
  • *****
  • Posts: 744
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12769 on: June 26, 2019, 10:31:58 AM »
how much are you willing to bank on an article that says "Most of the actions could be resolved by making preferred shareholders whole, potentially via a mass “sweep” of profits"?

edit: it also says investors are ecstatic about calabria's statements, ie his speeches, media interviews, etc. obviously this is no new insight

edit2: its amazing to me how strong confirmation bias is on this thread...
« Last Edit: June 26, 2019, 10:39:15 AM by hardincap »