Bill Ackman calls Trump’s plan for Fannie-Freddie IPO not ‘feasible nor desirable’ — here’s his solution
Pershing Square Capital Management founder Bill Ackman stated on Tuesday that the current proposals to conduct an initial public offering for a portion of the mortgage agencies Fannie Mae and Freddie Mac are not viable in the near future.
The US government, which has overseen these enterprises for the past 17 years, has been exploring various structures for a potential IPO, including the possibility of creating a single entity to represent both agencies. However, the complexity of such a transaction has proven to be a significant challenge.
“The sale of a portion of these companies to the public is currently neither feasible nor advisable,” Ackman mentioned during a presentation posted on X. Both Fannie Mae and Freddie Mac are already listed on the over-the-counter market.
President Trump’s administration is reportedly considering an IPO, potentially by the end of 2025, according to Federal Housing Finance Agency Director William Pulte. Trump has held discussions with bank CEOs regarding this as a means to end the US conservatorship of the agencies, which was initiated in 2008 following substantial losses during the subprime mortgage crisis.
Ackman, whose fund holds investments in Fannie Mae and Freddie Mac, has seen gains as their stock prices have increased amid discussions of privatization by the government.
Ackman suggested a simpler approach of transitioning the current over-the-counter listings of these agencies to the New York Stock Exchange, a process he estimated could be completed within a few weeks.
This move could potentially lead to combined valuations of around $400 billion for both agencies, with government stakes valued at approximately $300 billion and available for sale.
In addition to the listing process, Ackman proposed various steps such as recognizing prior payments made by the agencies to repay senior preferred stock issued during the crisis. He also suggested that the US Treasury exercise warrants obtained during the crisis to acquire a 79.9% common stock stake. Ackman recommended a reduction in the current capital requirement of 4.5% of all guarantees.
However, merging Fannie Mae and Freddie Mac into a single entity for a listing appears to be unfeasible as it would necessitate congressional approval, as per sources familiar with the matter who requested anonymity to discuss confidential talks in the past two weeks.
One source mentioned that creating a holding company could be a straightforward method to sell stakes, but government entities are restricted from establishing vehicles for this purpose. Another complex option could involve utilizing an existing joint venture between Fannie Mae and Freddie Mac as a listing vehicle and transferring assets accordingly.
