Investor Bill Ackman's Pershing Square hedge fund has purchased a nearly 10% stake in both Fannie and Freddie. But with the government insisting on burying the companies, is it a sucker's bet?
Activist investor Bill Ackman just placed one hell of a bet on the future of Fannie Mae and Freddie Mac even as the government continues to insist it plans to wind the companies down.
Ackman’s Pershing Square hedge fund has acquired stakes of nearly 10% each in Fannie and Freddie, to a tune of half a billion dollars, Reuters reports. Shares for both companies spiked Friday on the news that Pershing had purchased a 9.77% stake in common shares of Freddie and a 9.98% stake in Fannie.
News of the Pershing Square stock buy comes after equity fund manager Bruce Berkowitz of Fairholme Capital Management announced last week that he and other investors would be willing to buy and recapitalize the mortgage finance giants. Pershing said shares of Fannie and Freddie were currently “undervalued” and represented an “attractive investment,” Reuters reported.
However, any plans to privatize Fannie and Freddie would require congressional approval – and both Congress and the White House seem determined to kill the companies.
“The administration remains committed to reforming the housing-finance sector by responsibly winding down (Fannie and Freddie) and ensuring that any new system preserves broad access to credit for responsible borrowers, strengthens the economy and promotes financial stability," the Treasury said in a Friday statement.
With that in mind, an anonymous portfolio manager told Reuters that Ackman was making a sucker’s bet on Fannie and Freddie, calling the common stock “worthless” and predicting that any plan to privatize the companies “will never fly in Congress.”
