COBFInfinity

So the bizarre announcement of Pulte as DNI results in a bizarrely low response in the common and JPS today - modest declines on low volume. Seems like no one knows what to do with this news.

I am worried that the whole point of this is that a sketchy company made a tender offer that they plan to cancel, but gives some friend a chance to sell at better prices in the market. Probably too cynical, but these $100 profits just aren't worth the effort and concern to me.

If I understand correctly, the tiniest of micro cap companies offered to buy about 40% of it's shares at an almost 200% premium to the market price. This seems quite odd to me. Is there any history of pump and dump scams in micro cap stock tenders?

IPO doesn't matter. NYSE up-listing also doesn't matter. What matters is cleaning up the capital structure and outlining the path out of conservatorship. The complete inaction on any front implies that they are just going to run with everything already in place (e.g., capital requirements) as "good enough." That will actually be a positive if they decide they want to move forward - more studies, adjustments, etc. would just slow everything down and likely result in another punt. Side note: Pulte in recent months has on several occasions talked about how smart Trump was not to "sell the GSEs for $100 billion, because now they are worth $500+ billion." Does anyone understand what this even means? There was no threat of a forced sale or anything - Trump/Mnuchin could have set a path out of conservatorship that did not include any immediate sales of the Treasury stake.

Why would you expect a catalyst from legislation that everyone knows won't pass?

I looked at this concept quite a few years back and concluded the limited profit potential wasn't worth the time put into it. It feels good to get a high IRR on your small investment, but $138 profit doesn't move the needle on my portfolio.

What, is everyone here now just going along with the commons' prayer that SPS is written off and Treasury will only own 80%? I assume it will be 90+%. Anyway, the issue with your statement either way is that during Trump's term, they won't be able to sell the entire stake, so he doesn't get access to all those funds, just a portion. As I said above, it would be a lot easier to just cash flow the SPS again - Trump keeps control and gets a bunch of cash.

Not sure if you're talking about the widely held view among common shareholders that the SPS will be written off for no value (of which I have never been convinced), but JPS holders want monetization, too, for whatever reason the Treasury wants to use that money. Unfortunately, the path of least resistance if Trump only cares about getting money out is to re-start a dividend on the SPS. They could even do the NWS again - SCOTUS said they can do whatever they want. No complicated changes or stock sales necessary to do that. Ending the conservatorships requires a man of principle who actually believes that the companies should not be controlled by the government. Alas, Trump is one of the most un-principled people on the planet.

Well, the assumption shareholders have made is that Trump will want to utilize proceeds from stock sales for some policy objective, although I have never seen even a hint from his team as to what that might be. So it is certainly possible that Trump's idea is, "Hey, we can use the GSEs to bring mortgage rates down now, and then we can sell some stock later on, so I get to go to the piggy bank in multiple ways." But this MBS buying is seriously muddying the waters. Trump is known to misstate reality, so when he said he is directing the companies to buy MBS, what does that really mean? Does it mean that the CEOs already wanted to buy MBS but weren't doing so based on prior FHFA guidance, but Pulte, as regulator, said they could start now? Or does it mean that Pulte, as Chairman of both boards, "convinced" the CEOs to start buying MBS even if they didn't want to? I have no idea, but the latter scenario is exactly why there will be no stock sale until Pulte removes himself and his friends from the BOD (among many other things that need to happen.) The odds of this conservatorship stretching another 3 years, or even 30 years, are definitely not zero.

Quoting myself here, but just saw that Trump is planning to make more housing announcements at Davos conference later this month. As I said, the guy loves to make announcements, especially on a big stage. There are plenty of housing-related things they can announce and stretch it over months, if they feel like it. I, of course, withhold any predictions.

I wish I knew the answer to this question. But as for the MBS buying, the GSEs already had the legal authority to do this and didn't need Trump to announce anything in order to do it. But Trump looooooooves big announcements. So perhaps a secondary offering will give Trump more opportunities for big announcements? That might matter more to him than anything else, actually.

Lol, I sold out of GYRO in late 2016 after it was taking longer than expected and expenses remained high. These situations rarely turn out the way people write up the opportunities on investment forums.

What is there to discuss? It was just another teaser, but not a single material change to the conservatorships has actually occurred, yet.

One thing to think about is that you have to liquidate your TSP funds to move them and will therefore be out of the market for some period of time. If you're moving stocks, it's possible that you could miss 3% gains while you're trying to capture a 3% bonus. Of course, you could miss losses and come out ahead, but the point is you're taking a risk moving it all at once. So one thing to consider is whether you can move smaller portions of the TSP out at a time (ideally bonds or other lower volatility choices first, if you can pick specific funds to liquidate) and then when the cash is in your brokerage account, get it invested and proceed with another round from the TSP. Depending on how much effort you want to put in, you can try to have offsetting sales of equities in TSP to match the equity buys in brokerage so that your equity exposure across both accounts is relatively stable. I don't have a TSP account, so not exactly sure how the mechanics work, but something to consider when having to roll over cash (whether or not there is a transfer bonus.)

It shouldn't even matter what the government says/does to restructure - the past robbery raises the risk of a future robbery that doesn't exist with most companies. However, the investor class tends to be greedy and short-sighted, making the same mistakes over and over. But it seems absurd to think that preferred stocks that haven't paid a dividend in over 17 years would just start trading as if they are a pristine credit. But maybe, and hopefully, that is what the market decides.

A HUGE question I have (with many dollars of impact to be determined) is what yield will the fixed JPS trade at when fully recapitalized? One could argue that they'll be better capitalized than ever before and therefore justify a yield that is in line or even lower than a money center bank. Alternatively (and my view) is that knowledge that a future FHFA can legally screw over shareholders should justify a higher yield. This is one of those rare instances when I hope the market disagrees with me and takes an optimistic view! So a 5% JPS coupon (or one of the various floaters) might trade at 85-90% of par in the optimistic scenario and 70-75% of the par in the less optimistic scenario. If JPS dividends aren't expected for a number of years, maybe they only trade at 50-60% of par in the shorter term. So I think JPS prices remain relatively low for good reason, until there is certainty and clarity on what a restructuring actually looks like.

One hypothetical would be if they don't plan to pay common dividends for a long time and could choose not to pay preferred dividends during that period. Thus, the preferred don't get screwed, exactly, but would still trade at a hefty discount compared to if they are cash flowing. Most people expect that common dividends will be paid quickly after recapitalization as that is what investors will be looking for, but it's not guaranteed.

But so what? This is an argument that utterly fell apart over 4 years ago when SCOTUS ruled on Collins case. Trump's Treasury lawyers fought tooth and nail to say that NWS was legit, and SCOTUS gave it a rubber stamp. SPS is equity, not a debt that can be paid down. So the entire value is still on the company's balance sheets. So did Trump now decide to just forgive all of that value this time around, when he could have done so (and shareholders were definitely asking for) in his first administration? Maybe he did, but there is no evidence of that as of today. Listen, I have owned JPS continuously since 2014. I know that the NWS has screwed investors in a major way. But legally, the argument that Treasury has "gotten it's money back" is utterly meaningless.

The only argument I see from common holders as to why SPS should be written off as that "it's fair", or "it's the right thing to do." There are no legal arguments anymore because SCOTUS wiped them all out. Investors price things in questionable ways all the time, so I'm not going to attempt to understand everything. But I am definitely not going to take an investment stance assuming that Treasury just decides to give up all the value of the SPS that it has fought so hard in court to keep over many years - and that has included Trump's Treasury all along.

Yeah, I'm actually finding it hard to have any meaningful discussion about these companies lately.

Dude, you haven't even researched these companies, have you? The SPS value is IN ADDITION TO the 80% warrants on common. You might want to start looking at that.

I assume SPS will be converted into a material portion of common shares, resulting in common prices notably lower than where they trade today. I don't see how JPS are wiped out without a receivership. And that is not what is being planned.

Quite a bit more intriguing is that Pulte tweeted this message within the last hour: "IMPORTANT FOR ANYONE INTERESTED IN Fannie Mae. Please read the full risk sections that Fannie Mae has listed in their 10-K." I'm not actually going to dig through the 10-K, but it seems very likely that he is calling attention to the fact that Treasury owns the whole company and shareholders could get massively diluted. If investors respond logically tomorrow, I think the commons should take a notable dip. From the bigger picture, it seems like some form of restructuring plan progress behind the scenes for him to want to put out a vague CYA after he's pumped up the company's values so much.

Wow. No, "writing off" SPS is not a binary event at all. It matters very much how much is given up by Treasury. One end of the spectrum ends with common shares at $0.01 and the other end at, I don't know, $100 (I haven't bothered with the math of things that aren't going to happen). Not sure they care about lawsuits. If JPS dividends get turned back on, the largest issues will trade at or above par. You think the holders are going to start up a 5+year lawsuit, or just sell and walk away with massive gains? I kinda think they'll opt for the latter.

It's not binary at all. There is a huge range of outcomes where Treasury could legally end up with any common ownership percentage between 79.9 -99.9% that it chooses. It might seem binary if you are on other discussion boards where, based on no evidence that I can see other than "Ackman said so," or "Trump loves us," current common holders just assume that Treasury is going to write off most or all of the SPS for no value. Some even say the warrants get written off, too! Whereas investors who don't agree with that assumption, or at least don't want to take the risk behind that assumption, only hold JPS. So it seems like there are only two paths, but that's not at all the case. What there SHOULD be is discussion among common holders about how much dilution there will be, but instead all I see is "Will we get a 5x, 10x, or 50x?" I'm honestly baffled by the whole thing - yeah, I only own JPS. Smaller side note as it less materially changes outcome for common - it's unclear if JPS will get a conversion offer into common. Lutnick recently talked about wanting to get a "mark-to-market" valuation and someone else made the point that a JPS conversion just leads to a huge number of motivated sellers of the common that would drive the market price down. So, even though a sizeable portion of the preferred are at above-market rates, they may just leave them outstanding for a while.