Ackman Offers 'Baby Step' Alternative As He Warns Against Fannie, Freddie IPO

Fannie Mae and Freddie Mac’s largest common shareholder doesn’t want the mortgage giants to be released from government oversight, at least not yet. 

Pershing Square CEO Bill Ackman, whose firm owns 210 million shares of the government-sponsored entities, outlined his vision for them on X Tuesday morning. 

Fannie Mae and Freddie Mac have a long list of governance issues that need to be addressed prior to any initial public offering, according to Ackman, who urged President Donald Trump’s administration to take an alternative route to winding down the government oversight, known as conservatorship. 

“We do not believe that a sale of a piece of Fannie and Freddie to the public is either feasible or really desirable at this moment in time,” Ackman said during the presentation. 

Instead of an IPO, Ackman is proposing that the Trump administration move common stock currently listed over the counter to a major exchange after confirming that the entities meet their capital return requirements relative to the government’s takeover of the entities during the Great Recession.

“If the president were to say, ‘I want this to happen tomorrow,’ it would happen tomorrow,” Ackman added during a question and answer session after the presentation. “It's really a few-week process. I actually spoke to the New York Stock Exchange as recently as this morning, and they have confirmed that this would be a very high priority for them.”

That approach would allow the government to continue the conservatorship regime while it works out how to unwind the program and also send a signal to preferred stockholders that their shares were safe from being wiped out or written down during a restructuring or recapitalization.

Ackman argued that the bailout of the GSEs had already earned a more than 10% return — which he described several times as the government’s “pound of flesh” — that should lay the groundwork to loosen oversight. 

Ackman wants the Treasury Department to consider the $100B senior preferred stock purchase agreement that was part of the conservatorship program as repaid. He argued that Treasury has pulled in $301B in dividends since conservatorship, exceeding the original terms of the contracts. 

Converting the senior notes to common stock would be dilutive to shareholders and drag down the firms’ value on the public market, Ackman said. If the notes were considered fulfilled, the federal government would still own just under 80% of both firms, which Ackman said it should consider keeping as a means of funding more investment. 

“I also think the government should think seriously about never selling its stake,” he said. “A 79.9% stake in these entities, I think, is an excellent asset for a sovereign wealth fund.”

Ackman said such a move could boost the stock as high as $40 per share, up from less than $10 today. Fannie Mae and Freddie Mac were both trading up more than 2 percentage points after the presentation Tuesday.

Ackman said recognizing that the agencies had met their repayment obligations and publicly listing existing shares would be a “baby step” that would “create a lot of visibility around the company.”

“It will eliminate the fear of people's preferred shares being converted, and it will open the market for Fannie and Freddie stock to a much broader group of investors,” he said.

The hedge fund manager and outspoken activist investor said he outlined his proposal to the president and his top advisers over the last two weeks, including Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and Federal Housing Finance Agency Director Bill Pulte. 

He made a public presentation to invite debate on the plan, Ackman said.

“If [Massachusetts Sen.] Elizabeth Warren has something to say, let's see what she has to say and then let's address whatever her comments are,” he said. 

Kristin Gannon, the co-head of corporate advisory and mergers and acquisitions at Eastdil Secured, said it looked like Ackman was trying to shore up corporate governance at the GSEs ahead of any IPO. 

Going public while still under conservatorship would raise questions about whether management is acting in the best interest of shareholders or the government in its role as conservator, she said.  

“Ackman has taken enough companies public to know that you have to have your governance right, the right management team and the right structure,” Gannon said. “If you take a company public and bring in public shareholders when it's under conservatorship, there's going to be a misalignment.”

FHFA oversees the conservatorship program, which was born from the Global Financial Crisis and the federal government’s bailout of the agencies, and Pulte has been a vocal advocate for an IPO. 

Ackman’s proposal would keep conservatorship in place during the process of converting warrants to common stock and listing the shares on a public exchange, which he said “is literally a zero-risk” way for Trump to fulfill campaign promises without injecting any risk into mortgage markets. 

“Now is not the right time to sell these entities that are growing in value in a very significant way,” he said. “There are significant opportunities for optimization, for better management of these enterprises. A lot needs to be done to remove uncertainty.”

The proposed approach would allow the federal government to demonstrate the implied value of the agencies and raise funds — key goals of the White House — while the details of an end to conservatorship are hammered out. 

Fannie Mae and Freddie Mac, which buy loans from other lenders and repackage them for sale as investments to add liquidity to the mortgage market, also operate under stricter capital requirements than private institutions that make them a less attractive investment option today and would require reworking ahead of an IPO, Ackman said. 

A key sticking point to any privatization push has been the federal government’s guarantee of debt from the GSEs, a concept that had been implicit until the bailout during the recession made it an explicit facet of the mortgage market. 

Trump has pledged to keep the guarantee in place after conservatorship ends, but Ackman said the issue of federal backing wasn’t as crucial as it appeared. 

“Every major financial institution has an implied government backstop because you don't want to punish the entire country if a major financial institution fails,” he said. 

He also said he was against any plan to merge the two GSEs, a proposal that had been gaining traction among some of Trump’s allies, because competition in the market was good for consumers.  

“The president's meme where he talks about the Great American Mortgage Corp., he just left off an S,” Ackman said. “I do think they should both continue to exist as independent enterprises.”