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Luke 532

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

    in General Discussion

    Posted

    my biggest fear was that sen. crapo would ask admin reform to stop pending congressional analysis of plan suggestions for congressional reform, and he did the EXACT OPPOSITE. crapo encouraged the administration to ACT

     

    so the rest of this SBC hearing is gravy for me

     

    Kennedy to Calabria: "I encourage you to saddle up and go!... Congress is going to do nothing, you need to get started and fix this car wreck."

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

    in General Discussion

    Posted

    https://seekingalpha.com/article/4290548-gse-shareholders-win-landmark-5th-circuit-legal-victory#alt1

     

    Treasury now has a plan out with the stated purpose of recapitalizing Fannie and Freddie as promptly as practicable. That said, if Trump loses the next election and this separation of powers lawsuit is not resolved, an incoming democrat can fire Mark Calabria and change the course here. That's hypothetical, of course. As such, preferred shareholders are basically in the drivers seat. They have valid claims and there's really no reason to settle for just par anymore, especially with the Treasury plan having come out.

     

    It is now impossible to raise money in the next 15 months without settling the lawsuits because who is going to invest a meaningful amount of money with courts ruling that the government broke the law to hurt shareholders and not only that but the shareholders are making it so that the people running the government can get fired by an incoming administration thereby changing course midway through a recapitalization.

     

    Preferred shareholders have valid claims that the government jumped the shark when it entered into the net worth sweep and violated their contracts. Todd Sullivan says plaintiff lawyers are talking 150% of par for an expected settlement.

     

    That's more or less what I heard. My point is that the government needs to settle this and get it done quick at this point and they just lost a major legal ruling so now they really have no choice.

     

    In other words, the government just released a plan to recapitalize the companies and the plaintiffs can prevent that from happening if they refuse to settle the lawsuits. As such, plaintiffs now are in a position to determine what they are arguably owed in order to drop the lawsuits in order to help facilitate the recapitalization.

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

    in General Discussion

    Posted

    I know you all know, but if anybody is still looking to initiate a position or add and you want to avoid all the action of the high volume series, then take a look at FMCCL (50-par) and FNMAH (25-par).  The everyday Joe is going to be looking at FNMAS first so the others may lag a bit giving you a better entry.  Yes, talking my book as those are my two largest concentrations in this name, but what I said still holds true.  Wish you well!

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

    in General Discussion

    Posted

    Thoughts?  Does the timeline below look accurate based on the plan, Mnuchin's comments, etc.? 

     

    GSE timeline is set. @FHFA capital rule and SPSPA amendment by end of Q4'19. Congress gets until end of Q1'20 to legislate reform as GSEs get approval for capital restoration plans. Quick recapitalization to ensure end of conservatorship by January 2021. $FNMA $FMCC

     

    As an aside, gotta hand it to Maria, she brought the heat: "investors really were screwed (sounds like Kudlow's tweet from a few years ago)," "the director and structure of FHFA is unconstitutional," etc.  It's been said that in previous interviews Mnuchin/Treasury has told her what she is/isn't allowed to ask about, so if true, allowing her to get these talking points out in the open "screwed," "unconstitutional" is pretty interesting (could be a way to get Obama to take a lot of heat). 

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

    in General Discussion

    Posted

    I would also add any settlement will reflect highly on the preference of the big preferred holders, Paulson et al. We are going to ride their coat tails who are we kidding?

     

    There is still a lot of post ruling euphoria in the air affecting a lot peoples judgement. I'm going to refrain from un realistic expectations or calculations in the mean time. Seems like only a let down can come with that thinking.

     

    I hear ya. I'm not in the euphoric camp, but pleased with Friday's ruling. I'm merely turning over every stone, hence the questions about plaintiffs expecting 150% of par.

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

    in General Discussion

    Posted

    I tend to agree, but the reason I'm asking these questions is that a reliable source told me that the plaintiffs expect 150% of par and that par in their minds doesn't represent any compensation for the 7 years they've missed out on dividends due to the "potentially" illegal NWS.

     

    Discussion from Todd Sullivan on plaintiffs seeking 150% of par.  Listen to minute marker 26:20 at the following link: https://valueplays.podbean.com/e/7-jun-14-2019/

     

    The following quote is at 29:50...

    "Based on the things I've heard and the people I've spoken to, they are really confident that 100% is their ground floor. And they're going to get damages.  Damages are going to be another 50-60% on top of their par.  That's not something they're looking at as a hopeful scenario, they're looking at it like this is what we'll be owed.  The government will argue differently but this is what we're going to get."

     

    Note: this is from June, so long before the positive news from En Banc that we heard this past Friday.

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

    in General Discussion

    Posted

    The Ps are not gamblers. I have to think they’d be happy with a quick settlement that gets them close to par, rather than getting greedy and risking a loss at scotus. The important thing to me is that now treasury has the political cover to pursue what is rationally in the best interests of all parties.

     

    I tend to agree, but the reason I'm asking these questions is that a reliable source told me that the plaintiffs expect 150% of par and that par in their minds doesn't represent any compensation for the 7 years they've missed out on dividends due to the "potentially" illegal NWS.

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

    in General Discussion

    Posted

     

    reasonable operating assumptions:

    1. there will be a global settlement in connection with recap.

    2. junior prefs agree by class to a exchange into common at or close to par.

    3. some kind of private offering for common is first step before a large public offering.

    4. this private offering will "set the price" for the common.  I expect this price will be relatively low, to entice private investor(s) to buy.  junior pref holders in favor on low common price as well.

    5. once common private placement is done and some retained earnings build up, large common offering(s).

    6. junior pref holders who hold their exchanged for common could see future price appreciation

     

    Thank you. So base assumption is par or slightly less, let's call it 90% of par, and then once converted it trades along with common because, well, it is common at that point.

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

    in General Discussion

    Posted

    Thoughts?

     

    https://www.valueplays.net/2019/05/31/subs-gse-investment-change/

    Under Delaware law, (according to plaintiff atty David Thompson) if plaintiffs win, they are entitled to “pre-judgment” interest. It typically comes to, on the low end 6% annually (courts split on simple or compounded) from date of injury. This would be from Sept. 2012, the enactment of NWS. Total damages mean preferred final value ~150% of par. Rather than paying cash, this could be rolled into conversion.

     

    Edit: this was posted with Todd's permission

     

    I believe this relates to the Lamberth case (Delaware law) not the collins case (federal law).  collins might still have a federal interest accrual on payments in excess of the 10% moment.

     

    Would you say greater than 100% of par is likely, not likely, unknowable?  I'm trying to place weights on various outcomes: 70% par, 80%, 90%, full, 110%, 120%, 130%, etc.

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

    in General Discussion

    Posted

    Thoughts?

     

    https://www.valueplays.net/2019/05/31/subs-gse-investment-change/

    Under Delaware law, (according to plaintiff atty David Thompson) if plaintiffs win, they are entitled to “pre-judgment” interest. It typically comes to, on the low end 6% annually (courts split on simple or compounded) from date of injury. This would be from Sept. 2012, the enactment of NWS. Total damages mean preferred final value ~150% of par. Rather than paying cash, this could be rolled into conversion.

     

    Edit: this was posted with Todd's permission

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