Bill Ackman Said He Is Short Fannie and Freddie, Introduces Plan to Reorganize The GSEs (FNM, FRE)
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On CNBC this morning, hedge fund manager William Ackman said he was short the common stock of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). Ackman also laid out a plan to reorganize the GSEs.
Ackman said Fannie and Freddie should have "fortress" balance sheets. Under his plan, Fannie can raise about $86 billion in capital by giving investors in $750 billion of senior unsecured notes 90 cents on the dollar in debt of a new company, with the balance in equity. Subordinate debt holders would get warrants. Under Ackman's plan, current equity holders would be wiped out.
Ackman proved his acumen as a short seller in 2007/2008 as short positions he held in MBIA (NYSE: MBI) and Ambac (NYSE: ABI) proved to be big winners due to the credit crunch.
Shares of Fannie Mae is down 17% and Freddie Mac is down 19% this AM.
Ackman said Fannie and Freddie should have "fortress" balance sheets. Under his plan, Fannie can raise about $86 billion in capital by giving investors in $750 billion of senior unsecured notes 90 cents on the dollar in debt of a new company, with the balance in equity. Subordinate debt holders would get warrants. Under Ackman's plan, current equity holders would be wiped out.
Ackman proved his acumen as a short seller in 2007/2008 as short positions he held in MBIA (NYSE: MBI) and Ambac (NYSE: ABI) proved to be big winners due to the credit crunch.
Shares of Fannie Mae is down 17% and Freddie Mac is down 19% this AM.
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