Hedge fund manager, billionaire and legacy government-sponsored enterprise investor Bill Ackman is pushing his plan for Fannie Mae and Freddie Mac in response to officials’ call for input.
Ackman, who previously has suggested that the GSEs be merged, backed off that concept in a live broadcast and subsequent Q&A in an X space Tuesday morning while offering up another plan.
The founder and CEO of Pershing Share Capital Management pushed instead for accounting that would recognize the repayment of the senior preferred shares, exercise of the 79.9% warrants in the companies and a relisting of their stock.
“What we think is likely and highly easy to execute is effectively just an uplifting of the entities to the New York Stock Exchange once the senior preferred stock payments have been accounted for, and that can literally be done in a simple letter of agreement,” he said.
Relisting is important because trading in the over-the-counter markets as Fannie and Freddie’s shares now effectively limits investment.
“The exchange would be delighted to have these companies back,” Ackman said.
Ackman said he viewed Trump administration officials’ plans for a secondary stock offering for a portion of the GSEs’ shares as potentially valuable.
“It enables the administration to show the American public kind of a hint of the potential significant value,” he said.
Ackman said the government may decide to retain its stake but also noted that a secondary offering could pave the way or a more comprehensive move away from public ownership.
“It is important that the government, as part of this process, announce a timeline for when they’re going to accomplish the rest of the objectives,” he said.
At that point, Fannie Mae and Freddie Mac could become “must-own securities for institutions and very attractive, high yielding, dividend paying companies that will be great retirement stakes for the investing public,” said Ackman.
Several steps would have to be taken before that could happen including establishing adequate capital, guarantee fees that would earn a sufficiently adequate return on equity, and for a deal to be struck in which existing preferred stock purchase agreement could be a potential backstop.
“There needs to be clarity on what powers the FHFA will retain post conservatorship,” Ackman said, referring to the Federal Housing Finance Agency that oversees Fannie and Freddie.
Ackman said the GSEs also would need to recruit and design the kind of compensation packages that would attract “best in class” management teams and boards of directors.
“Most significantly, all this needs to be accomplished, and the entities need to come out of conservatorship,” he added.
As far as the idea of combining the two companies, Ackman said he rejected it after looking into the possibility.
“I don’t think it makes sense to merge,” he said, walking back his earlier reading of President Trump’s illustrated post about a NYSE listed Great American Mortgage Corporation as suggesting a combination, and noting that it likely represented the two entities collectively.
Ackman also reiterated bitterness about how the government staged a net worth sweep in 2012 was damaging to legacy GSE investors’ interests up until it was discontinued during President Trump’s first term.
While courts upheld the sweep and Ackman said he doesn’t argue the legality, he said he considers it improper and important to avoid in any future similar circumstances. Ackman said he has been maintaining his current holdings in GSE stock with no plans either to buy or sell.
