Financial Services
Wild Stock Action Continues for Fannie Preferred
By Philip van Doorn03/22/13 - 11:32 AM EDT
Stock quotes in this article: FNMA, FMCC
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NEW YORK (TheStreet) -- The intense ride continued for Fannie Mae (FNMA) continued on Friday morning.
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Fannie Mae's common shares were up 4% in late morning trading to 81 cents, while common shares of its sister company Freddie Mac (FMCC) were up over 2% to 80 cents.
Fannie's common shares on Thursday sank 28%, following a gain of 80% over the previous two trading sessions. Freddie's common shares on Thursday dropped 28% on Thursday, after seeing a gain of 71% over the previous two days.
The action in Fannie Mae's preferred shares remains very strong. For example, Fannie's preferred series E (FNMFM) shares, with a coupon of 5.10% and a par value of $50, rose were up 18% late Friday morning to $13.20, after a gain of 115% over the previous two trading sessions.
The trading interest in Freddie Mac's preferred shares has been more subdued, but in the same upward direction. For example, Freddie's preferred series Z (FMCKJ) shares, with a coupon of 5.375% and a par value of $25, were up 2% to $3.23 late Friday morning, after a gain of 5% over the previous two days. Through Thursday's close at $3.20, the Freddie Mac preferred series Z shares were up 52% from a month earlier.
Both mortgage giants were taken under government conservatorship by the Federal Housing Finance Agency (FHFA) in September 2008. At that point, common and preferred shares of Fannie Mae and Freddie Mac were considered worthless by most investors, who saw a very low probability for the government sponsored enterprises (GSEs) to resume operating as private companies, and very little prospect for the payment of dividends on existing preferred stock.
This week's ride for the shares began on Tuesday, when The Wall Street Journal brought attention to a March 14 filing, when Fannie Mae said it would delay filing its annual 10-K report to the Securities and Exchange Commission. Fannie said it would need extra time to analyze whether or not it could recapture some of its $61.5 billion valuation allowance for deferred tax assets (DTA), as of Sept. 30.
The recapture of Fannie's DTA would provide a major boost to the company's effort to redeem $116.1 billion in preferred stock held by the U.S. Treasury, for bailout assistance since September 2008.
