Fannie, Freddie US$30 billion IPO being weighed for this year
[WASHINGTON] The Trump administration is considering selling shares of Fannie Mae and Freddie Mac in an offering that could start as early as this year, according to senior administration officials.
The plan could value the government-controlled mortgage giants at some US$500 billion or more and would involve selling between 5 and 15 per cent of their stock with an offering expected to raise about US$30 billion.
No final decision has been made and US President Donald Trump is still weighing his options, one official said. The Wall Street Journal earlier reported the news.
Shares of both Fannie Mae and Freddie Mac surged as much as 22 per cent in Friday (Aug 8) trading, the most in more than two months.
The federal government bailed out the companies in September 2008 to stave off catastrophic losses during the financial crisis. Policymakers in Washington have struggled for years with what to do with the so-called government-sponsored enterprises. Congressional efforts to free the companies have repeatedly failed on concerns about the impact on mortgage costs and the firms’ commitment to affordable housing.
One official said that Fannie and Freddie may stay in the conservatorship while being taken public.
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A combined initial public offering (IPO) raising US$30 billion or more would be the biggest on record, above Saudi Aramco’s US$29.4 billion listing in Saudi Arabia in 2019, according to data compiled by Bloomberg. On US markets, Alibaba Group’s US$25 billion debut in 2014 is the largest, the data showed.
Fannie and Freddie were delisted from the New York Stock Exchange in 2010. Their shares trade over the counter (OTC), where trading is often volatile. Both companies’ OTC stocks are quoted on the OTCQB Venture Market, which has relatively minimal requirements compared to major exchanges.
Trump has fielded pitches from the chief executive officers of large banks in recent weeks on how to execute the complex maneuver. Citigroup CEO Jane Fraser met with Trump on Wednesday. Leaders of Goldman Sachs Group, JPMorgan Chase, Bank of America and Wells Fargo have pitched the president, or plan to do so, Bloomberg reported last week.
Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and Federal Housing Finance Agency (FHFA) director Bill Pulte have been involved in the meetings, one official said.
The FHFA did not immediately respond to a request for comment.
Pulte in March fired the majority of the boards of both companies and appointed himself chairman of each. Investor appetite could depend on Pulte relinquishing his seat on the boards, according to David Dworkin, president and CEO of the National Housing Conference.
“The importance of independent boards to the value of the stock can’t be underestimated. Investors want to know that the boards of the companies have a fiduciary responsibility to shareholder value without political interference,” he said.
“It’s an extraordinarily complicated effort, and completing it by the end of the year would be a major lift,” Dworkin said, adding, “It has to be taken seriously because it appears clear that all the right people are in the room.”
A stock sale could provide a windfall for hedge funds and other investors. Bill Ackman’s Pershing Square Capital Management, for instance, holds a significant stake in Fannie, and the billionaire has been publicly lobbying the White House to end the conservatorships. BLOOMBERG
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