Billionaire investor Bill Ackman said that President Donald Trump’s administration is working to lift shares of the Federal National Mortgage Association (OTC:FNMA), or Fannie Mae, and the Federal Home Loan Mortgage Corp. (OTC:FMCC), or Freddie Mac, ahead of what could be “the largest IPO of all time.”
Trump Likes To See ‘Stocks Soar’
Ackman, who’s been an investor and prominent advocate for both housing finance companies since 2012, says that “It is abundantly clear that the administration wants Fannie and Freddie (F2) shares to go higher in the run-up to a share sale.”
Referring to Commerce Secretary Howard Lutnick’s recent appearance on CNBC, Ackman says that “Lutnick knows how to talk a stock up and that's precisely what he is doing here.”
See Also: Mortgage Bankers Association Voices Concerns With Trump’s Plans For Fannie Mae, Freddie Mac Merger
Ackman dismissed concerns that the government might dilute investors by converting senior preferred stock into common equity. “Those that have suggested that the government is going to unilaterally convert the senior preferred stock (SPS) into common stock and massively dilute shareholders have lost the plot,” he said.
Instead, Ackman argued that a successful offering depends on honoring the original terms. “The only way for a successful IPO to occur is to respect the original contract where the SPS receives a 10% return and the government receives 79.9% of both companies through the exercise of warrants.”
He says Trump is unlikely to hurt shareholders. “President @realDonaldTrump likes to see stocks soar,” he says, adding that the last thing he would want is to “wipe out the tens of billions of dollars of shareholder value he has already created.”
Freddie And Fannie: A $300 Billion Goldmine
Recently, Ackman had referred to the government’s stake in Fannie Mae and Freddie Mac as a $300 billion goldmine, referring to their $7 trillion in mortgage guarantees, on which they collect 0.65% annual fees.
Ackman also came out in support of Trump’s plans for a unified listing of the two companies, with the ticker symbol “MAGA.” He said that such a merger would help reduce the costs and risks of government oversight, ultimately leading to lower mortgage rates and significant synergies.
However, others, such as economist Peter Schiff, have pushed back against this plan, saying that such a merger could result in a monopoly in the U.S. housing finance market, eventually leading to a “moral hazard” far greater than what existed before the Great Financial Crisis of 2008.
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