Fannie Mae-No Politics (FNMA)

[Dollars1]

Sogo,
Sorry about my last post to you! I don't know who wrote the second sentence. :) Hope it didn't sound flippant. My 2 cents was going to be that, since the swap was for 15 million shares, and Ackman is in it for the long run, I'm not sure that Pershing Square would do anything to artificially raise the price just for that. As I understand he has to pay that price anyway in April, and again he's in it for the long run. $23-$47. It looks like the price will rise to that anyway by the end of April.

Having said all that, since he is the largest common shareholder by far, I'm sure there are things that could be done to manipulate the price, if they really wanted to. You had a good question about what method they might use to do that. I'm sure someone here has an answer on what techniques are used! :)

Why This Billionaire Added to His Stake in Fannie Mae and Freddie Mac
By Patrick Morris
April 5, 2014 | Comments (3)

"Multiple billionaire investors have put both their wallets and their words behind Fannie Mae (NASDAQOTCBB: FNMA ) and Freddie Mac (NASDAQOTCBB: FMCC ) and this week one announced he was upping his ownership to more than 11% of each.

Source: Insider Monkey.
The investment boost
Bill Ackman of Pershing Square Capital Management had two separate SEC filings placed this week which announced he has boosted his position in Fannie Mae and Freddie Mac by 13%, now owning 11.3% and 11.1%, respectively, of the publicly traded stock for the government sponsored entities.
Curiously, Ackman did not do this through the actual purchase of common stock, but instead entered into a total return swap agreement with UBS. In short, this is an agreement where UBS bought the additional stake in Fannie and Freddie on behalf of Ackman and Pershing Square. Pershing Square then pays UBS interest for the total cost of the stock purchase.
UBS will then pay Pershing Square for any positive performance in the shares of Fannie and Freddie, and conversely, Ackman would have to pay UBS for the negative performance.
The agreement is essentially a loan where Pershing will receive the possible rewards and risks of owning the common stock of Fannie and Freddie, except it doesn't have to tie up its own capital to do so."

http://www.fool.com/investing/general/2014/04/05/why-this-billionaire-added-to-his-stake-in-fannie.aspx