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Fannie Mae Common Shares Rally, Rebounding From Judge’s Ruling
By Jody Shenn October 14, 2014

Fannie Mae and Freddie Mac common shares rose for a fifth day in New York trading, erasing most of their drop tied to a court ruling last month, while the companies’ preferred securities posted smaller gains.

Fannie Mae’s (FNMA:US) common shares climbed 11 percent to $2.49 as of 12:49 p.m., after trading as low as $1.44 on Oct. 2. The stock closed at $2.69 on Sept. 30, the day that U.S. District Judge Royce Lamberth threw out a lawsuit that sought to force the U.S. to share the government-controlled companies’ profits with private shareholders.

“Whether it’s in the courts or Congress, this issue is not going to go away with one district court decision,” former presidential candidate Ralph Nader, a common shareholder who has been advocating for others, said on an Oct. 7 conference call for reporters organized by Investors Unite.
Video: Isaac Boltansky on Fannie Mae, Freddie Mac Profit Ruling

One series of Fannie Mae preferred stock, with a face value of $25, rose 2.6 percent today to $4.36. That is less than half of the closing price on Sept. 30, meaning some of the Wall Street investors with the largest bets are enjoying a more modest recovery because they favor the preferred securities.

Fannie Mae and Freddie Mac investor Perry Capital LLC on Oct. 2 appealed Lamberth’s ruling, which involved suits by investors also including Bruce Berkowitz’s Fairholme Capital Management LLC. The $7.9 billion Fairholme Fund has declined 13 percent this month, after making bets on Fannie Mae and Freddie Mac (FMCC:US) focused on the preferred shares.

Claren Road Asset Management LLC, the hedge-fund firm majority owned by Carlyle Group LP, slumped 5 percent in the first week of October after its investments in Fannie Mae and Freddie Mac preferreds lost about two-thirds of their value, according to an investor in the fund. Marathon Asset Management LP told investors in its $12.5 billion firm in a conference call that week that it was selling its preferred shares, people with knowledge of the call said.
Video: Isaac Boltansky on Fannie Mae, Freddie Mac Profit Ruling

Freddie Mac common shares advanced 11 percent to $2.39. That compares with a closing price of $2.64 on Sept. 30.

To contact the reporter on this story: Jody Shenn in New York at [e-mail]

To contact the editors responsible for this story: Shannon D. Harrington at [e-mail] Dan Kraut, Steve Dickson

http://www.businessweek.com/news/2014-10-14/fannie-mae-common-shares-rally-rebounding-from-judge-s-ruling