Whalesbook
Bill Ackman Bets Big on Fannie Mae, Freddie Mac for 2026 Potential Windfall
Billionaire investor Bill Ackman has made a rare public recommendation, urging investors to consider buying shares of Fannie Mae and Freddie Mac for 2026. These government-sponsored enterprises have been under federal conservatorship since the 2008 financial crisis, leading many to dismiss them as long-term stagnant assets. However, Ackman views these companies as an "extraordinarily compelling" investment opportunity, referring to his substantial stake as a potential "$10 billion lottery ticket."
This unusual endorsement comes as Ackman, the founder of Pershing Square Capital Management, typically guards his stock picks closely. He has held positions in Fannie Mae and Freddie Mac for over a decade, but recent developments and his evolving strategy have amplified his conviction. The prospect of these mortgage finance giants potentially exiting government control and relisting on a major exchange like the New York Stock Exchange (NYSE) appears to be the catalyst for his bullish outlook.
The Core Issue: Fannie Mae and Freddie Mac
Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) play a crucial role in the United States housing market. They do not originate home loans directly but instead buy mortgages from lenders, package them into mortgage-backed securities, and sell them to investors. This process is vital for maintaining liquidity in the housing market and keeping mortgage rates affordable for consumers. Together, these entities guarantee or back approximately 70% of all home loans in the United States.
Their stability was critically threatened during the 2008 financial crisis, pushing them to the brink of collapse. To prevent a systemic meltdown, the U.S. government intervened, placing both companies into conservatorship under the Federal Housing Finance Agency (FHFA). The Treasury Department infused billions of dollars and gained significant ownership through senior preferred stock and warrants, effectively controlling their operations for years.
Financial Health and Undervaluation
For nearly two decades, Fannie Mae and Freddie Mac operated under a profit sweep agreement, where almost all their earnings were sent back to the U.S. Treasury. However, since 2019, this arrangement was modified, allowing the companies to retain their earnings and rebuild their capital buffers. This shift has led to significant profitability, yet their status as perpetually "temporary" conservatorship candidates has kept their stock valuations suppressed.
Ackman highlights that Fannie Mae and Freddie Mac are trading at remarkably low multiples, estimated between 2.5 to 3.5 times their earnings. He believes this represents a substantial undervaluation, especially given their critical role and renewed financial strength. His personal stake in these companies is reportedly worth around $10 billion, a figure that has grown significantly as his thesis gains traction.
Ackman's Evolving Strategy and Investor Interest
Initially, Bill Ackman's investment was a contrarian bet on the eventual release of Fannie Mae and Freddie Mac from government conservatorship, expecting a return to public markets. The stocks traded sideways for many years, testing the patience of long-term holders. The landscape began to shift with indications that the Federal Housing Finance Agency might explore a path towards their eventual privatization or relisting.
Ackman's strategy has recently refined from advocating for an immediate full IPO or merger to pushing for a simpler first step: relisting on the New York Stock Exchange. This move is strategic, as many large institutional investors are barred from purchasing stocks traded on over-the-counter (OTC) markets. A NYSE listing would dramatically broaden the investor base, potentially driving prices significantly higher and realizing the stocks' intrinsic value.
Adding significant weight to Ackman's conviction, legendary investor Michael Burry, renowned for predicting the 2008 housing market collapse, announced in late 2025 that he also holds "good size" positions in both Fannie Mae and Freddie Mac. Burry sees an imminent relisting and projects that shares could trade at 1.5 to 2 times book value within one to two years, underscoring a growing sentiment among sophisticated investors.
The Trump Administration Factor
A key element bolstering the confidence of investors like Ackman and Burry is the apparent positive stance from the Trump administration. Statements from Treasury Secretary Bessent, Commerce Secretary Lutnick, and FHFA director Pulte have all suggested a bullish approach towards taking the companies public. Timelines discussed have pointed towards the first quarter of 2026 for potential significant actions.
The administration is also reportedly considering broader housing reforms, including the possibility of declaring a National Housing Emergency. This could serve as a catalyst for policies aimed at improving housing affordability for younger generations. An IPO or relisting could also generate substantial proceeds, estimated around $30 billion for the government, through strategic sales of shares.
Future Outlook and Risks
The path forward for Fannie Mae and Freddie Mac hinges on regulatory and political will. While Ackman and Burry are optimistic about a relisting and subsequent price appreciation, challenges remain. The exact timeline and the conditions under which the companies would transition out of conservatorship are still uncertain. Furthermore, the market's reaction to potentially massive institutional inflows and the government's exit strategy will be critical factors.
If Ackman's thesis materializes, the ~$10.60 per share price for Fannie Mae could see substantial upside, moving towards his earlier predictions and potentially much higher if institutional demand surges post-NYSE listing. Investors, however, must conduct thorough due diligence, as Ackman himself acknowledges his position is not independent due to his existing stake.
Impact:
The potential relisting of Fannie Mae and Freddie Mac could reshape the U.S. housing finance landscape. A successful transition would likely inject significant capital into the mortgage market, potentially leading to lower borrowing costs for homebuyers and increased availability of credit. For investors, this could represent a substantial opportunity for capital appreciation, especially if the current undervaluation is corrected. The U.S. government could also realize significant financial gains from its investment. This development is rated a 7 out of 10 in terms of its potential market impact within its sector.
Difficult Terms Explained:
Conservatorship: A legal arrangement where a government entity takes control of a company that is in financial distress to manage its operations and stabilize it.
Senior Preferred Stock: A type of stock that has a higher claim on assets and earnings than common stock, often used in financial rescue situations.
Warrants: Financial instruments that give the holder the right, but not the obligation, to buy or sell a stock at a specific price before its expiration date.
Contrarian Bet: An investment strategy where an investor goes against prevailing market sentiment, buying assets that are currently unpopular or declining.
Over-the-Counter (OTC) Stocks: Securities traded through a dealer network rather than on a centralized exchange like the NYSE or Nasdaq.
Book Value: The net asset value of a company, calculated by subtracting total liabilities from total assets. It represents the theoretical amount shareholders would receive if the company were liquidated.
FHFA: The Federal Housing Finance Agency, an independent U.S. government agency that oversees Fannie Mae, Freddie Mac, and other government-sponsored enterprises.
IPO: Initial Public Offering, the process by which a private company first sells shares of stock to the public.
NYSE: New York Stock Exchange, one of the world's largest and most influential stock exchanges.