Bill Ackman Takes Almost-10% Stakes in Fannie Mae, Freddie Mac
In separate SEC filings released today, Pershing Square Capital Management, run by activist investor Bill Ackman, disclosed it had amassed 9.98% ownership of Federal National Mortgage Association, or Fannie Mae , common stock and a 9.77% stake in the common stock of Federal Home Loan Mortgage Corporation, or Freddie Mac .
The value of the 63.5 million shares of Freddie Mac would be worth approximately $200 million at today's prices, and the Fannie Mae holdings would be worth almost $400 million. The releases do not disclose how much Ackman purchased the shares for.
This news comes just one day after Bruce Berkowitz of Fairholme Capital Managementannounced a proposal to take portions of the government-sponsored entities private in a $52 billion deal. Berkowitz and many others have amassed significant stakes in the preferred shares of Fannie Mae and Freddie Mac.
Combined, Fannie Mae and Freddie Mac were given $187.5 billion in the form of government bailouts during the financial crisis, but have since returned $185.3 billion to the government in the form of dividends. However, the companies still remain under conservatorship of the Federal Housing Finance Agency (FHFA) as they have been since September 2008.
Fannie Mae and Freddie Mac actually do not issue mortgages, but instead either insure them, or buy mortgages from banks that issue them and then package them into bonds known as mortgage-backed securities that are then sold to pension funds and other investment vehicles. In the most recent quarter, the two companies reported solid results, with Freddie Mac posting a net income of $6.5 billion and Fannie Mae announcing it had a net income of $8.7 billion. As a result of favorable tax gains, the two are expected to ultimately return $39 billion to the U.S. government in the form of dividends this year.
Ackman's company invests in and bets against a wide range of businesses. In August, Ackman resigned from J.C. Penney's board and sold Pershing's entire 18% stake in the department store operator as part of a deal to resolve a public dispute between himself and the Plano, Texas, company.
Last month Ackman reduced his short position against nutritional supplement maker Herbalife Ltd. Ackman had taken massive short positions on the company's stock, meaning his fund would make money if the shares decline.
-- Material from The Associated Press was used in this report.
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