investorG

lots of assumptions go into a common price target, many of which are completely unknowable right now: a) what happens with the warrants b) capital ratio target, and by when c) what type of capital is raised, at what price, and over what time frame d) long term earnings power and e) PE multiple f) court case outcomes g) trump admin's true priorities and congress' reactions h) probably others i'm not thinking of an appropriate range is $0 - $75, imo, with a base case somewhere around Ackman's targets.

another reason why the warrants may be in jeopardy: the government has earned 60bn from the GSEs. the next closest return from the crisis bailouts was less than 15bn. those with a fresh look (new administration) might not see the urgency for squeezing more out. especially as there are other ways to reward the govt forward looking (besides having a healthy housing mkt) such as the backstop reinsurance fee the GSEs will likely have to pay the govt until they are fully capitalized in a few years.

i'm not sure about transferring the warrants. i do see some preferred holders mocking the commoners on various message boards since the 2:1 relationship has broken down the last couple days on some sloppy media reports. however imo it's not likely that trump would try to negotiate a deal that benefits a couple of his visible and well-documented supporters at the expense of the common / taxpayer (if warrants remain; and if they don't remain then even better). removing the court outcomes, there's a good chance the common is cheap to preferred currently.

if the warrants are kept, then you are aligned with a CEO who wants to maximize value. and there's a reasonable chance the warrants are ditched: there's a limit (perhaps 25-50bn) of capital that can be raised per year. it's clear the companies will need to raise primary shares to build up their capital ratios. since the govt wouldn't want to squeeze out the primary issuance, that would mean it would take several years to sell their stakes which is inconsistent with Mnuchin's comments that he wants the govt out of ownership. or something in between like the govt raises the strike price on the warrants and then exercises them, which serves as an injection of primary capital and thus doesnt crowd out the company's attempt at raising equity.

i suspect many hedge fund owners of fnma preferred, especially in the illiquid ones, have been shorting the common in the last 48 hours to lock in gains and, possibly, in their minds in light of the research reports / dilution, win on both sides. i see it differently, as discussed in a prior post.

re-listing the stock would be important since there's a limited pool of buyers currently, retail+hf's.

fwiw, I have tilted towards the preferred in 2016 due to the warrants / dilution. however I have switched to slightly favor common because I now view a larger chance (than before) that the warrants don't get exercised, for three reasons: a) Mnuchin directly said the govt needed to get out of ownership. selling the govt's exercised warrants would take years, as they would likely be selling along side primary capital raises b) Berkowitz, I believe, in a recent interview said they aren't asking for payouts (back dividends, punitive damages, etc), rather just that the companies go free from here on; this seems to be a conciliatory change in tune vs. a few months ago when he wanted to honor contracts on dividends c) the president-elect doesn't seem to be against citizens making money

in my opinion there could be 2 flaws with the kbw analysis: a) he might assume all of the capital proceeds need to be raised immediately rather than over time b) it's circular, if the stock price rises then far fewer shares need to be issued, creating a higher current fair value in addition, there is some small chance the warrants are not exercised. the analysis of this investment is time consuming and stressful ---- many people don't want the career risk to be associated with this call, and thus they come up reasons (that sound good) to stay away.

treasury pick is rumoured to be coming this week. assuming no court news, any predictions how much upside (common) with mnuchin and how much downside with a visually less appealing candidate? up or down 50 cents either way?

question, please, is there a firm deadline on when mandamus needs to be ruled on? given there are other deadlines in december coming up related to sweeney's ruling. also, please, if there is a settlement soon, do the 12000 documents go away forever, or could they be re-accessed in a new suit? basically i think its in too many powerful people's interest, including trump's, that these emails are not released.

if you expect a recapitalization, which may or may not happen, new investors won't likely pony up the necessary funds unless they see the existing preferred shareholders shown at least a little respect -- which would be accomplished thru dividends, a cash tender (perhaps at a discount to par but well above current prices), and/or a swap into common at some ratio (perhaps 2:1).

I'm not mr thompson but i believe he meant 'in the end' when making that statement, which would make it theoretically correct. I doubt he meant 'during ongoing trading'.

regarding mandamus, we don't know the 3 judges, if two of them are from the handful of Obama appointees, there should probably be more concern than currently discussed.

will the mandamus ruling just pop out some time or is there a consistent tues - fri release window like the perry appeals court? i am wondering if they will find a technicality and rule for the govt to avoid dragging obama and his staff through the mud since a new sheriff (trump) is in town to set future course of action.

Does the election of trump and recent stock price move reduce the urgency of the courts to side with the plaintiffs / people? If clinton had won, the courts might have viewed themselves as the people's last big hope for justice, and more likely produced a plaintiff-friendly verdict, all things equal? as we all know very smart people can disagree on merits of this case, leaving some level of subjectivity

fox business is calling for j dimon for tsy scty

i wouldnt trust any rumors on the treasury secretary until it's confirmed (or more so, he/she is confirmed by the senate) ---- it's an important choice and trump could pull a shocker, good or bad for the GSEs.

regarding the settlement question, Your guess is as good as mine regarding what Trump will do. But Obama might want to settle the current lawsuits to avoid emails coming out, depending on what's in there. this would allow trump a clean slate to handle the GSE's however he sees fit without ongoing lawsuits. So imo the mandamus ruling is important on this front. any good ideas on timing?

now that the briefs are in, what's a reasonable time frame on the mandamus ruling? imo the release enthusiasm is a little over-hyped currently in the media and message boards. the mandamus ruling is important for any settlement potential, as there's less incentive to settle if the 11000 documents remain contained

my take, fwiw, is that there is little / no chance for a full release by Obama in the lame duck; it's too important of a policy decision. I do think he might settle the current major outstanding lawsuits with some large 1-time dividend payments / tender offers. Alternatively he could allow the companies to build capital as an intermediate step to jumpstart reform in 2017. Regarding trump, it's a wild card, but given his advisers, I think the risk reward at the current price levels is very favorable. Also, he should want to monetize the 80pct warrants because he's going to have a lot of deficit holes to fill to pay for his infrastructure and tax cut plans.

well they got their way, no additional documents released pre-election. our near term outlook rests on three judges and trump (maybe). hope those four feel inspired stand up for the little guy...the govt and taxpayer can still have a home run investment while at the same time sharing some of the upside.

probably rules out reversal in Perry, assuming the mandamus review will take some time.

given the current context, it's fairly insensitive to many of the long term shareholders to put out a twitter announcement like this.

how is everyone thinking about the election's impact on GSE securities? my take is below. the better Democrats do in Congress, the better for president, it's not completely clear but I think trump is more constructive: a) greater chance for settlement in Nov/Dec since Hillary cant pardon, if needed b) greater chance for an announcement to build capital starting in Nov/Dec to help protect the GSEs (I don't think Obama will recap or release, those are too big of moves to make in a lame duck setting) c) he has some advisers who are pro-GSE and d) he's a businessman and will likely want to monetize the $150bn+ warrant value anyone have strong views?

realistically whats more likely: the judges have not made a decision or they are waiting until after the election knowing that this decision will attract attention, whatever way they rule?