Fannie Mae-No Politics (FNMA)

[kthomp19]

A few things to realize about Ackman:

1) He isn't always right. He lost a ton of money on Herbalife and Valeant.
2) Fannie/Freddie is Pershing Square's smallest position, at around 1.5% of their portfolio. It can go to zero and not affect performance all that much.
3) At today's prices, his junior pref holdings comprise about 30% of his overall FnF portfolio (~11M shares of FNMAS/FMCKJ, ~180M shares of FNMA/FMCC).
4) One reason he bought the juniors is that "it hedges our risk of a restructuring that disproportionately benefits the preferred versus the common shares" (page 15). That means he both knows that the juniors can outperform the commons, and that he won't be able to do anything about it.
5) He wants Treasury to exercise its warrants, because that would align Treasury's interests with those of legacy common. Treasury converting the seniors to common instead would reverse that link.

Invoking Ackman as justification for a 100% common position would be just plain disingenuous.