Fannie, Freddie Shares Mimic Meme-Stock Mania With Wild Swings

Whalen Global Advisors Founder and Chairman Chris Whalen discusses the state of Fannie Mae, Freddie Mac and the mortgage market.

Bill Ackman lit the fire and Bill Pulte supercharged it.

Their influence helped drive retail traders to Fannie Mae and Freddie Mac, whose shares have soared more than 500% since Donald Trump’s election a year ago. But now, as equity markets are gripped by volatility and crypto assets suffer their worst rout in years, those same investors are fleeing.

Thursday’s wild selloffs, and further losses Friday, were a reminder that the fervor of retail traders — whipped up in part by Federal Housing Finance Agency head Pulte — can quickly turn sour. Ackman, a billionaire hedge fund manager, sent out a social media post this week blaming forced liquidations and margin calls in the cryptocurrency market for the sagging prices on the mortgage giants.

“I underestimated how much exposure Fannie and Freddie (‘F2’) have to crypto, not on balance sheet, but in their shareholder bases,” Ackman said on X.

Ackman’s theory for the pullback — that leveraged cryptocurrency investors facing margin calls had to sell other assets to raise cash — was echoed by some on Wall Street who saw the stocks drop by more than 10% on Thursday. It happened as Bitcoin was on track for its worst monthly performance since a string of corporate collapses rocked the sector in 2022.

Read: Ackman Fannie-Freddie Plan Boosts Shares After White House Pitch

“There was clearly a lot more leverage to take out in crypto and the recent high-flyer equities themes,” Charlie McElligott, a cross-asset strategist at Nomura, wrote in a note to clients Friday.

Shares of the pair are up six-fold since just before Trump’s election on bets Pulte will help oversee a process to privatize Fannie Mae and Freddie Mac after almost two decades of government control. The Trump administration has said it’s a priority, though has been mum on specifics and timing.

Wedbush analyst Henry Coffey assumed coverage of Fannie Mae with a double-upgrade to outperform, citing the implications of potential Trump administration moves to recapitalize the mortgage finance giant, which would lead to the Treasury Department eventually monetizing its investments in the company.

“Look at the numbers; hot sauce to follow,” Coffey wrote in a note

He cited the FHFA’s Bill Pulte discussing selling stock, and the possibility Treasury may deem senior preferred shares as paid and issue no shares when converting them into common equity

Coffey called the latter the “best path forward given the amount of fresh equity that FNMA will have to raise to meet required capital levels, estimated at $45 billion, and absorb the likely sale of a major block of FNMA’s shares (5% = $2b+ in value) by Treasury, prior to exiting conservatorship”

Other paths may “prove less costly,” including attaching some warrants to either shares sold by Treasury or by Fannie, or pursuing joint ventures in mortgage tech and consumer products with the private sector in exchange for additional common shares

Coffey sees uncertainty about the administration’s plan as an “immediate risk factor” inherent in his investment view; nonetheless, he sees a “reasonable probability that the administration will proceed in a manner that does not put current share value at risk and that raises the capital needed for FNMA to exit conservatorship and to transfer mortgage risk back to the private sector over time”

Fannie shares have soared around 650% since the start of November 2024, just before Donald Trump’s election, on optimism about the administration’s likely policies, though they’ve shed about 35% of their value since a Sept. 11 peak

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