FNMA and FMCC preferreds. In search of the elusive 10 bagger.

[muscleman]

A question for Chris. I was puzzled by this table here:
https://twitter.com/HoldenWalker99/status/1140643774512676864

It almost looks like 50-50 to me for affirm/reverse decisions.

Didn't we say it was 14 reversals out of 16 before? 

13/16 reversals of merits panel appellate decision.  I guess this tweeter went to rev/aff of original district court decisions.

Got it. Thank you.

Still, the timeline in this tweet is quite interesting. The longest so far is 244 days. Given the complexity of this case, I'd assume it takes that long, which puts us to October ruling.

[Jcmeg35]

A question for Chris. I was puzzled by this table here:
https://twitter.com/HoldenWalker99/status/1140643774512676864

It almost looks like 50-50 to me for affirm/reverse decisions.

Didn't we say it was 14 reversals out of 16 before? 

13/16 reversals of merits panel appellate decision.  I guess this tweeter went to rev/aff of original district court decisions.

Got it. Thank you.

Still, the timeline in this tweet is quite interesting. The longest so far is 244 days. Given the complexity of this case, I'd assume it takes that long, which puts us to October ruling.

Given Calabria's public comments, does anyone else think that the Court is going to hold off as long as possible in issuing a ruling to see if the matter will settle itself with an Admin change to the NWS? I guess the question is if one thinks the mindset of the Judges is to kick the can down the road and see if the case settles itself. Does anyone else have a different view?

[cherzeca]

@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 negotiations 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

[Jcmeg35]

@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]

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?

[cherzeca]

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]

I really hope they listen to Tim Howard. Logic and truth in every post.

[Midas79]

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]

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]

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.