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Bargin Stock Sale at Freddie

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July 18, 2008 – Comments (2) | RELATED TICKERS: FMCC

One of the things that I have said about financial stocks is that you will have no idea what they will look like at the end of the deleveraging.

Consider Freddie.  Its market cap is about $5 billion.  They want to sell $10 billion in shares?  That means existing investor will own 1/3rd of what they previously owned as it sounds to me like a tripling of the shares.  And to attact investors it would not surprise me if they further discounted so there ended up being 4 or 5 times as many shares.

And, if you read the Wall Street report, how the heck do they manage the payouts that would be expected?

But at least the existing 13-14% yield on preferred shares is a risk of losing everything kind of rate...

2 Comments – Post Your Own

#1) On July 19, 2008 at 3:05 PM, ikkyu2 (99.38) wrote:

That's not an existing yield, that's a trailing yield.  I think there's a very real possibility that shareholder equity gets wiped out in the re-regulation.

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#2) On July 21, 2008 at 4:10 PM, dwot (97.03) wrote:

Shareholder equity should be wiped out. 

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