Wednesday, January 22, 2014

Value of a share of FNMA

Value of  shares of FNMA:

This is my valuation for the stock if certain things happen. Not what the stock price today is, $3.17.

If a bipartisan Bill starts to move through congress, $6.00, why because the bill will have to leave Fannie intact. And in doing so, this would move the stock upward from this point forward.

If the court overturns the Sweep and removes the Senior shares value against them, $60 as there would be all the money these companies are worth left for only shareholders. not govt, even if in conservatorship still.
the govt would still hold the warrants for 79% of company.

If the court overturns the Sweep and removes the Senior shares value and removes the warrants. $300 a share. the govt would still hold conservatorship, but the company would be intact and ALL value would go to the Shareholders.

The Value of Fannie is Easily 100 billion dollars. IF SOLD. Remember Fairholm offered 50+ billion for them and it was flat out rejected. And for the most profitable company in the USA, FANNIE MAE, 100 billion would be cheap considering they brought in over 35 billion in profit in 2013. And their Old book is shrinking and their NEW book is growing and "it is strong" quoting the 10-q 75% of their business NOW.

Removal of Conservatorship would fetch $360 a share today. If warrants were canceled. The market cap of Fannie could be around 420 BILLION based on PE of 12 and 35 billion in earnings per year.

Now all these are Just wild guesses but you can see how they are derived.
there is LOTS of room between $3.17 and $360 , This is the upside to FANNIE MAE.

What is the downside?
The downside would be whatever the govt tries NOT to PAY THE RIGHTFUL OWNERS OF AN AMERICAN CORP, as found by courts over the past five years that Fannie is shareholder owned and NOT govt owned. I cant see an argument for not paying out to current holders what ever the price was the day before the conservatorship. This amount is $7. I cant see a value less than this.
$7 is %125 higher than todays price. I see no real downside for holding long.

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