Wednesday, September 10, 2014

Fannie Mae Common

No matter what congress decides to do with our countries mortgages, what matters is what the court will do with the warrants and the preferred stock of the govt. If they find it to be illegal, 80% chance, what will happen to common stock value?

Well if the govt is paid back 116.1 billion already with interest. So if you liquidate the company, they currently have ZERO debt.
If the govt receives 126 billion so far from the companies and the The junior preferred shares have a collective face value of about $35 billion, and the primary aim of the lawsuits is to get a full payout on the shares the commons would get negative 25 billion as of today, but within 2 years this number would become 3 billion positive to commons or about $3 a share in cash. 

If the govt can be seen as charging interest on the DTA write down that should never of happened in the first place then the govt payout would have been less and therefore the payment back would have been less. more like 65 billion and not 116.1 remember the reason the 116.1 ever got that high was the company had to borrow money to pay the interest that was demanded on an amount that was higher than was needed to balance the book of fannie. using the 65 billion number you can add the 35 billion for junior to that and you are at 100b. if the govt has TAKEN 126b-100b then the over payment is 26 billion right now. forget if fannie is around in future. Does not matter to the court and these findings. 26/1.2 billion common shares and you get about $21 a share to common right now today in cash when the US govt shutters fannie as they say. This number is climbing by $3 a share every 3 months. close fannie and this does not change the fact that the money paid has exceeded the money borrowed and about $21 a share in liquidation should go to common.

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