Bill Ackman describes Trump’s proposal for a Fannie-Freddie IPO as impractical and undesirable — here’s his alternative solution

Ackman on IPO for Fannie Mae and Freddie Mac

Bill Ackman, the head of Pershing Square Capital Management, indicated on Tuesday that the idea of launching an initial public offering for parts of Fannie Mae and Freddie Mac is not likely to happen soon.

The U.S. government has held authority over these organizations for 17 years and has looked into several options for a possible IPO, including merging the two into a single entity. However, the challenges involved in such a deal have presented significant hurdles.

In a presentation shared on X, Ackman remarked, “At this time, it is neither feasible nor desirable to sell some of these companies to the public.” It’s worth noting that both companies are already available on the over-the-counter market.

Last month, William Pruitt, the Administrator of the Federal Housing Finance Agency, mentioned that the Trump administration was “opportunistically evaluating” the IPO possibility, possibly as soon as late 2025. This came after discussions between President Trump and bank CEOs aimed at terminating the conservatorship that began in 2008 following extensive losses during the subprime mortgage crisis.

Ackman’s fund holds shares in both Fannie Mae and Freddie Mac, which have gained in value since privatization talks emerged.

Instead of an IPO, Ackman recommended transitioning the companies’ current over-the-counter listings to the New York Stock Exchange, which he thought could be accomplished in a few weeks. He posited that this move could lead to a valuation of nearly $400 billion, with the government’s stake estimated at around $300 billion available for sale.

Ackman also outlined some necessary actions to facilitate going public, like acknowledging past payments from government agencies as repayments for preferred stock issued during the crisis. He suggested that the U.S. Treasury should then utilize its stock acquisition rights from that period, effectively raising its ownership in common stock to 79.9%. Additionally, he advocated for reducing the current capital requirement of 4.5% on all guarantees.

However, merging Fannie Mae with Freddie Mac and taking them public poses challenges since it would need Congressional approval, according to multiple sources who preferred to remain anonymous.

Sources indicated that while establishing a holding company could be a straightforward approach to selling shares, government entities are prohibited from creating such vehicles. A more complex avenue could involve leveraging the existing joint venture between the two companies as a listing vehicle and transferring assets there.