Fannie Mae-No Politics (FNMA)

[jacklanvo99]

Correction: This piece was updated on March 22, 2016 at 9:30am EST to clarify that government received warrants to acquire nearly 80% of FNMA common stock. The previous version stated that the government had acquired nearly 80% of FNMA common stock.

To date, the investments have not performed well. Since the Sohn conference, shares of Fannie and Freddie are both down more than 60% -- and trading for approximately $1.50 each. During CNBC's Delivering Alpha conference in July, Ackman called the investments the "most interesting" in his portfolio, as it offered both the most upside and the most downside. Not surprisingly, Ackman said the downside outcome was "very unlikely."

As a refresher, the U.S. government put Fannie and Freddie into conservatorship in the wake of the financial crisis of 2008. Specifically, the government received warrants to acquire nearly 80% of the companies' common stock and also aquired senior preferred shares, which paid a 10% dividend. In August 2012 -- just as the companies were returning to profitability -- the government changed the terms of the agreement: Instead of paying a 10% dividend, Fannie and Freddie were required to pay nearly all of their profits to the U.S. Treasury, in what has been called the "net worth sweep."

In August 2014, Ackman filed suit against the government in Washington D.C.'s U.S. Court of Federal Claims, saying that the net worth sweeps represented "self-dealing," and that the sweeps violate the fifth amendment of the United States Constitution.

"I just think this cannot become a precedent where the U.S. government can step in and unilaterally take 100% of the profits of a U.S. corporation forever," Ackman said last July.

Although Ackman's points may be shared by others, the battle he wages is a big one, and one that has been unsuccessfully fought already: Other investors that have sued on similar grounds include Fairholme Funds and Perry Capital.

Ackman reiterated his stance on Fannie and Freddie during a panel conversation at Columbia University in September 2015.
http://realmoney.thestreet.com/articles/03/21/2016/fannie-and-freddie-stakes-not-likely-improve-ackman-anytime-soon