Sign In
SHARE
Fannie Mae's Earnings: Awful
Fannie Mae's stock is certain to tank today, and not necessarily for the obvious reason. Yes, its quarterly loss of $2.5 billion was much larger than expected. Yes, total shareholder equity evaporated at an even larger pace: it was was $38.8 billion as of March 31, down from $44.0 billion at the end 2007: a drop of a staggering $5.2 billion in one quarter. But much more immediately, Fannie Mae announced a $6 billion capital raise, including $4 billion of equity today alone.
A large chunk of that $4 billion is going to come from the issuance of something called "non-cumulative mandatory convertible preferred stock," which is a flavor of convertible bond. Now buyers of convertible bonds are a specialized stock, and they always short the stock when buying the bond, especially when they're buying a mandatory convert, which is essentially a form of equity issuance.
It's almost as if Fannie Mae was trying as hard as it could to push its stock price down today: not only releasing atrocious quarterly results, but at the same time also announcing a dilutive issuance of new equity and a simultaneous issuance of bonds whose buyers will be shorting the stock. Oh, and on top of all that, Fannie Mae announced that it will cut its dividend by 10 cents from the 35 cents paid this quarter.
Still, bad news for shareholders is probably good news for any taxpayers alarmed by Charles Duhigg's 2000-word article today on the precarious position that Fannie and Freddie find themselves in. As long as the capital markets are willing to inject new capital into the GSEs, that means the federal government doesn't have to.
Loading...
Thank you for registering as a Portfolio.com Insider. Your comment has been added.
Create Your Public Profile
- The Times' Rorshach Geithner Story
- Apr 27 2009 9:26AM EDT
- Sinking Animal Spirits
- Apr 27 2009 8:45AM EDT
- Counter-cyclical Urban Policy
- Apr 26 2009 10:00AM EDT
- Be Your Own Counterfeiter
- Apr 26 2009 9:36AM EDT
- Being Tim Geithner
- Apr 25 2009 12:37PM EDT
- Notes From a Press Conference Naif
- Apr 25 2009 9:41AM EDT
- What Good is the News?
- Apr 25 2009 8:32AM EDT
- Stressful Enough
- Apr 24 2009 2:29PM EDT
- Not Regretting the Pound
- Apr 24 2009 1:09PM EDT
- Introducing the New Ford Squeeze
- Apr 24 2009 9:47AM EDT
- Non-Economic Questions of the Day
- Apr 24 2009 9:12AM EDT
- The Stress Test Blind Alley
- Apr 24 2009 8:36AM EDT
- Happy Hour
- Apr 23 2009 9:40PM EDT
- Recovery Without Rebalancing
- Apr 23 2009 6:13PM EDT
- The Shape of Your Recession
- Apr 23 2009 5:11PM EDT
Archive
Categories
Links
- Email Ryan Avent
- Econospeak
- Financial Crookery
- The Epicurean Dealmaker
- Naked Capitalism
- Alphaville
- Marginal Revolution
- The Panelist
- FP Passport
- Overcoming Bias
- Andrew Leonard
- Barry Ritholtz
- Brad Setser
- Carbon Tax Center
- Calculated Risk
- Greg Mankiw
- Free Exchange
- Dean Baker
- Alexander Campbell
- Kash Mansori
- The Bayesian Heresy
- A Fistful of Euros
- John Quiggin
- Michael Mandel
- Lance Knobel
- Mark Thoma
- Dan Gross
- Curbed
- Streetsblog
- Chris Anderson
- Deal Journal
- MarketBeat
- DealBook
- DealBreaker
- Carl Bialik
- Michelle Leder
- Brad DeLong
- Ultimi Barbarorum
