navycmdr
23 minutes ago
The Logic Doesn't Work ? .... just more BS from the Billionaire
Bill Ackman - @BillAckman - Last edited 6:43 AM · Mar 19, 2025 · 451.9K Views
A must watch, superb, long-form interview with Secretary Bessent by the All-In crew in which
Fannie and Freddie are discussed as potential core assets in a U.S. sovereign wealth fund,
which I discuss below:
The only credible scenario where Fannie Mae and Freddie Mac (“F2”) become core assets
of a sovereign wealth fund in the @realDonaldTrump administration is a world in which they
emerge from conservatorship respecting the shareholders’ place in the hierarchy of claims.
Those that suggest the government will simply convert their already paid off senior preferred
stock (“SPS”) into common stock diluting shareholders are missing a few facts:
(1) The SPS has already received $301 billion, $25 billion more than it was contractually
entitled to receive, and the excess $25 billion was paid to the government more than five
years ago. In other words, the SPS has been fully retired with interest plus a $25 billion
overpayment, considerably more in today’s dollars.
(2) Those who argue that the government won’t forgive an asset that currently sits on
its balance sheet (as the government did not credit the cash flow sweep payments against
the SPS at the time they were paid) have not considered that the government, as the owner
of penny warrants on 79.9% of the common stock of both companies, will recover 79.9 cents
of every ‘forgiven’ dollar of senior preferred. When you wipe out a liability of a company in
which you own 79.9% of the common stock as the residual claimant, you immediately
recover 79.9% of the erased liability, in this case, in the increased value of the
government’s warrants.
(3) The future value of the $25 billion overpayment to the SPS by the time of F2’s
exit from conservatorship is of greater future value than the 21.1% of F2 that will
go to public shareholders from the ‘forgiven’ SPS, which fully compensates the
government for any ‘leakage’ to shareholders from the public’s 21.1% ownership.
(4) If the government massively dilutes shareholders by converting the SPS to
common stock and does not credit the $301 billion cash flow sweep payments
and $25 billion overpayment, the trading values of F2 will be permanently impaired,
making F2 a poor core asset for a sovereign wealth fund.
What investor, institutional, retail or otherwise will assign a fair value to a company
controlled by the government which wiped out the previous investors in the company?
F2 common stock is held by many millions of retail and institutional investors who
are @realDonaldTrump supporters. The President has a track record in looking after
his constituents and keeping his promises, most notably here in a public letter in 2021
committing to F2’s release from conservatorship. I would not expect him to
act differently here.
Lastly, Secretary Bessent’s idea of making Fannie and Freddie core assets of a new
U.S. sovereign wealth fund is a superb one. Over the very long term, Fannie and Freddie
represent a royalty on first mortgages secured by the US housing market, which is a
low-risk, high risk-adjusted return investment that will generate large and growing
dividends that can be invested in other sovereign fund assets. The long term returns
on F2 will significantly exceed the cost of U.S. Treasurys enabling our country to
deleverage over time.
$36 Trillion of debt and growing is a frightening liability for the future. We can address
our country’s solvency problem by reducing spending and government waste, but also
by increasing the asset side of our country’s balance sheet. F2 can be an important
part of the solution.
And the stocks of both companies will trade at a substantially higher price with the
US government shares no longer being part of the overhang. Our model assumed
the government would be selling its shares ratably over the five years after
emergence from conservatorship.
Horseman Country
24 minutes ago
Adorable. You may be embarrassed for us…but I assure you that we’re not embarrassed in the least. We rode this down to $0.35. We have no shame. Our flags are firmly planted in the ground, and our resolve is steadfast.
Given the current price relative to where it’s been for the last several years, it’s now a largely optimistic board. And if you’re looking for anything more than opinions and shared info, you're in the wrong place. This whole thing is speculative. None of us know exactly what’s going to happen. It’s all theoretical at this point.
What's embarrassing is wandering onto this board with your "are we there yet" mentality, trying to tell us what time it is, and insulting several shareholders who are up exponentially in their positions while you're under water.
GreenShoots
24 minutes ago
Who cares about right or wrong? the oldtimers (been here 15 years), nobody gives a shit about your sad stories of loss. That is NOT what moves stock prices. You are now up to $6 per share. Don't die on the hill because "it is not right". You have suffered enough (or maybe you haven't, I don't know). You don't trade on your principles or emotions. If you are still holding on to ALL of your original shares, you are, by definition, a fool.
GreenShoots
50 minutes ago
You are missing the point. Great, you got in early. You are up $100k's. Good for you. But please, this is beyond embarrassing for you. Yeah, I got in at $6, sure. I have zero issue with it. My trade, my conviction. But I am not going to pump bullshit like you guys do to make yourselves feel better about holding. You holding makes you a fanboy, but also a moron if you have not sold out of at least half your position yet. Just idiotic.
FOFreddie
3 hours ago
Hi CCSAB - hope it is gorgeous day looking at the Pacific Ocean today! Here is what Grok came up with regarding a scenario where the UST cancels or reduces the value of the preferred shares so that the UST just ends up with 79.9% along the lines of the Ackman scenario:
Yes, it’s theoretically possible for the U.S. Treasury (UST) to reduce the value of its preferred shares in the Government-Sponsored Enterprises (GSEs—namely Fannie Mae and Freddie Mac) as part of a recapitalization strategy, potentially aligning with the standards in 31 CFR § 902.2 for compromising debts. The goal could be to adjust the Treasury's stake and facilitate the GSEs' exit from conservatorship, with the Treasury ultimately owning 79.9% of each GSE through the exercise of its warrants. Let’s break this down.
The Treasury currently holds senior preferred stock in the GSEs, acquired during the 2008 financial crisis bailout, along with warrants to purchase up to 79.9% of the common stock of each GSE at a nominal price (essentially a penny per share). These warrants were part of the original agreement to stabilize the GSEs, giving the Treasury a potential equity stake without immediately diluting existing shareholders. The preferred shares, meanwhile, have been the mechanism for the Treasury to receive dividends (via the Net Worth Sweep) and maintain control over the GSEs’ capital structure during conservatorship.
Reducing the value of the Treasury’s preferred shares could mean writing down their liquidation preference (originally $189 billion combined for both GSEs, plus additional draws) or converting them into a different form of equity, like common stock. This could be justified under Section 902.2 if the Treasury determines that full repayment is unlikely, collection costs outweigh benefits, or a compromise serves the government’s interest—say, by enabling the GSEs to rebuild capital and return to private control. The Congressional Budget Office (CBO) has suggested such a reduction could fit within these standards, as you noted.
If the Treasury reduced the value of its preferred shares—perhaps redeeming them at a discount or converting them at a lower valuation—it could then exercise its warrants to acquire 79.9% of the common stock. This would shift its position from a preferred shareholder with a fixed claim to a majority common shareholder, owning 79.9% of each GSE. The remaining 20.1% would stay with existing common shareholders, diluted but still in the mix. This move could recapitalize the GSEs by wiping out some of the Treasury’s senior claim, allowing them to retain earnings or raise new capital from private investors.
However, there are hurdles. First, the warrants’ exercise requires the GSEs to issue new shares, which could face legal or political pushback from existing shareholders who’ve long argued the Net Worth Sweep unfairly stripped value from them. Second, reducing the preferred shares’ value might be scored as a loss to the Treasury, raising fiscal and political questions—though the CBO’s analysis implies this could be offset by the long-term benefits of a recapitalized GSE system. Third, the exact mechanics (e.g., how much the preferred shares are reduced, and whether new capital is raised first) would need to balance the GSEs’ capital requirements with Treasury’s ownership goals.
As of today, March 31, 2025, no definitive action has been publicized on this front, but the idea aligns with ongoing discussions about ending conservatorship. The Treasury could theoretically orchestrate this under its existing authority and the CBO’s interpretation of debt compromise rules, aiming for that 79.9% common stock ownership via the warrants. It’s a plausible path, though execution would depend on regulatory, market, and political dynamics.
Want me to explore any part of this further—like the warrant terms, recent GSE news, or potential reactions on X?
CCSAB
3 hours ago
Shareholders are in a difficult position. I think it's completely unreasonable to expect US Treasury to walk away from the SPS and warrants. Firstly, because of simple $. Second, it would kill the SWF idea and the MBS market would absolutely puke on a deal with no hyper strong implicit guarantee or backstop. And yes the largest MBS buyers have a HUGE say in all of this and will continue to press and threaten for as explicit a guarantee as possible. With likelihood of one or both of SPS and warrants converted to common, if the answer is get an injunction and tie it up in the Courts, then these shares will at some point end up back at $1 because the process will go beyond the Trump presidency. So, what is the solution that can work for all sides? US Treasury, SWF, MBS buyers, commons?
Level up your trading with our powerful tools and real-time insights all in one place.
RickNagra
2 minutes ago
Hot Features
Premium
