Quick Read
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Bill Ackman says Pershing Square (NYSE:PS) owns about 10% of both Fannie Mae and Freddie Mac, and sees 10x potential in the stocks.
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Ackman calls a release "a political imperative" and says a president can do it by executive order, even if midterms go against the President.
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Taxpayers get paid first: Treasury's senior preferred stake carries a $238 billion liquidation preference, and warrants cover 80% of common stock.
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Bill Ackman says the White House has a historic trade within reach. "It will be the greatest real estate deal of all time," the founder of Pershing Square( NYSE:PS ) said of releasing Fannie Mae and Freddie Mac from government conservatorship. The Motley Fool's report of Pershing Square's third-quarter earnings call on Tuesday, Nov. 3 noted he estimated the move would create half a trillion dollars of value, 80% of it held by taxpayers. He called that estimate conservative.
"It's an opportunity for the president to ring the bell at the New York Stock Exchange and literally deliver hundreds of billions of dollars of value to taxpayers," he said. No release plan has been announced.
Ackman Sees an Executive Order Route Despite Midterm Losses
Ackman called a release "a political imperative" for Republicans and said that in conservatorship "the government has godlike powers" over housing policy, mortgage terms and underwriting. His concern is that a future president from the other party could use those powers. Stocktwits reported on the CNBC comments. He said the same day that "[Even if] midterms go against the President, fortunately, this is something you can get done by executive order, and it's actually politically extremely important."
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He linked the current delay to the election calendar. On the call, he raised the worry. He said the concern was that "even a discussion about Fannie and Freddie could possibly increase mortgage rates." The Fool reported Ackman's account that Treasury Secretary Scott Bessent told him the companies' ownership needs to be resolved in 2027 or 2028. Democrats won control of Congress on Nov. 3, and analysts quoted by Rallies.ai said that could bring gridlock and scrutiny that weigh on the odds of a release.
Ackman Holds a Large Stake in the Outcome
Per The Motley Fool, Ackman said Pershing Square owns about 10% of both companies. He put the combined holding at more than 200 million shares and said the stocks have 10x potential. The Fool added that "his 'half a trillion' is a forecast from an investor with a stake in the outcome, and much of that value, by his own math, would go to taxpayers rather than to common shareholders."
His firm's own stock traded at $50.15 as of 1:46 PM ET Nov. 4. That was up 7.47% on the day and 108.36% over the past year, even though third-quarter revenue of $56.60 million fell short of expectations.
Taxpayers Get Paid Before Common Shareholders
The Motley Fool notes that the Treasury holds warrants to buy 79.9% of each company's common stock. Fannie Mae's third-quarter release shows that the senior preferred stock held by the Treasury carried a liquidation preference of $237,996 million as of Sept. 30. Common shareholders are entitled only to what remains once those claims are met, so any release plan would have to decide how the preferred stake and the warrants are handled.
Fannie Mae Earns Billions While Still Short of Capital
Fannie Mae's third-quarter filing reported net income of $4.2 billion and net worth of $119.6 billion as of Sept. 30. Under the regulatory framework, it also showed an available common equity tier one capital deficit of $30 billion. The release still carries the label "In conservatorship", a status that began in September 2008.
Both Stocks Have Lost About Half Their Value
Both stocks trade over the counter. Fannie Mae closed at $5.56 on Nov. 2, down 48.18% year to date and 50.84% over the past year. Freddie Mac closed at $5.00, down 50.69% year to date and 51.67% over the past year. On Nov. 3, per The Motley Fool, Fannie traded near $5.26 and Freddie near $4.85. Rallies.ai reported that both fell more than 20% after Democrats won Congress but did not give prices.
Ackman said the stocks rose eightfold after the 2024 election and described them as down 60% this year. Shareholders have also won profit-sweep litigation that the government continues to appeal. "I wouldn't mind it going to the Supreme Court because I think the Supreme Court might attract more attention to how inappropriate and unfair this was," he said.
What Everyday Investors Should Weigh Now
These are volatile over-the-counter shares, and any return depends on decisions no one has made yet, including whether a release happens, when, and how the Treasury's preferred stock and warrants are resolved. Investors who hold or are considering the stocks can track the companies' quarterly filings, statements from Treasury and the housing regulator, and the appeal. Volatility and the potential size of losses are part of that research. In The Motley Fool's words, "Ackman can afford to wait years and ride out a 50% drop, but many people can't."
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If you've saved over $1,000,000, this guide is for you. The last thing you want in retirement is to run out of money, you want your money to generate lasting income while you enjoy your life.
Now you can learn the strategies wealthy retirees use to fund their retirement with The Definitive Guide to Retirement Income from Fisher Investments. Download the guide today! (sponsor)
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