FREJN - Trump's Bessent To Explore GSE Restructuring Options
2025-01-24 10:46:17 ET
Summary
- Fannie Mae and Freddie Mac, despite record net worths, remain in conservatorship with Trump expected to push for privatization and restructuring through incoming Treasury Secretary Scott Bessent.
- Bill Ackman argues common shares are undervalued, but preferred shares offer anti-dilution protection; I favor preferred shares due to uncertainty.
- Bessent's and Pulte's confirmation sets the stage for an equity restructuring, impacting common and junior preferred shareholders.
- With key appointments and executive orders, I expect significant progress on ending conservatorship within Trump's first 100 days, setting the stage for equity offerings.
Fannie Mae ( FNMA ) and Freddie Mac ( FMCC ) are two companies in government conservatorship despite having record net worths and a current president who issued an executive order to end the conservatorships in 2019. I most recently covered them on Aug. 28 before the election. Trump just picked his Treasury Secretary, Scott Bessent. Scott Bessent just put out a written response indicating that, "(i)f confirmed, I look forward to exploring options related to restructuring the GSEs capital structure." This follows on prior Trump administration commitments to do so.
Investment Thesis
It is unclear if the SPSPA will be written down. Bill Ackman put together a slide deck explaining the reasons why this should be the case in his opinion. If you believe his reasoning, common shares are undervalued. If you aren't too sure about that, like I am, then preferred shares may be for you. Outlined in this article are some of the primary reasons that I expect Trump to act to end the conservatorships and sell "the government's common stock in these companies at a huge profit and fully privatize(d) the companies."...
Trump's Bessent To Explore GSE Restructuring Options