Based on conservative estimates and recent statements from government officials, Fannie’s post-IPO value should be much higher than it is now. With $18 billion in normalized earnings and $85 billion in tangible equity, our basic P/E and P/TBV calculations suggest a market cap in the low to mid hundreds of billions,
which would mean a share price around $40 to $50.
If demand is strong and the number of shares available is limited, valuations could even reach the high levels seen before 2008, especially if the IPO is oversubscribed.
We expect this IPO to be promoted as a rare, 'once-in-a-generation' chance, likely drawing in both institutional and retail investors, particularly if it is presented as a way for Americans to invest in the housing market. Overall, the outlook is positive, and the potential for gains remains as the process moves forward.
Summary
--- Fannie Mae is poised for a historic IPO, with valuations estimated between $210B and $420B depending on market sentiment and deal structure.
--- A small IPO float (3–6%) is expected, driving scarcity premiums and likely oversubscription, with institutional and retail investors targeted for long-term ownership.
--- Valuation scenarios use normalized earnings and tangible book, referencing pre-conservatorship multiples; base case values FNMA near $300B, or high-$40s per share.
--- The Administration is moving quickly, with IPO and privatization plans potentially tied to broader economic initiatives and a U.S. sovereign wealth fund announcement.
Introduction:
This report is an update to the analysis we published in July since we have more information on what the restructuring will look like and how it will be done. We continue to follow the stock closely on a day-to-day basis, and our approach is very much in line with the philosophy of Stan Druckenmiller: run a concentrated portfolio, focus on a select basket of opportunities, and watch the basket very carefully. Share price and key developments
FactSet
Some of the assumptions in this report come directly from our daily tracking, while others reflect forward-looking insights we’ve developed along the way. What makes this update particularly interesting is that several of these assumptions go beyond consensus views.
They offer a layer of second-level thinking that challenges how most observers currently frame the Fannie Mae (OTCQB:FNMA) and Freddie Mac saga.
The Administration keeps saying this could be one of the biggest IPOs ever. They seem to want to promote it that way to attract investors and create excitement, but they cannot make any definite claims yet. Until a prospectus is filed, they usually avoid specific statements about size or ranking to comply with SEC Section 5 quiet-period rules. The final deal size also depends on the terms and investor interest, so it cannot be announced in advance. That is why we will likely keep hearing careful language like 'could be the largest' instead of 'will be the largest.' This approach lets the banks offer a large deal to a mix of big and small investors who might hold the stock for the long term. In short, more excitement means a bigger pool to share, even if only a small part is sold at first.
We believe Pulte’s comment on Fox News saying that both enterprises are worth around ~$500–700B is not an arbitrary figure. He knows exactly what the banks have pitched the Administration and that this will be the ballpark, and historical valuation benchmarks point in the same direction. He also mentioned the IPO is likely to be highly oversubscribed, with a 3 to 6 percent float that would be small compared to the companies’ overall size.
Another comment that we found very interesting by Sec. Scott Bessent where he said “We are looking for a range of institutional investors who will be long term holders, but we also want the American people and small shareholders to have a stake in these companies (Fannie and Freddie) too. We want them to be part of the American dream.”
This is the first real recognition of shareholders since the 2021 Trump letter to Rand Paul. It’s important because the IPO depends on support from long-term investors. You can’t expect to launch a major offering by diluting their stakes and then asking them to invest again. A more practical approach is to offer a small 3 to 6 percent float, which establishes a taxpayer mark-to-market while the company continues to build capital through retained earnings and other adjustments. As Howard Lutnick has pointed out, a deal will happen with only a small portion sold. The main goal is still to focus on mortgage spreads and affordability.
Share count and JPS conversion
We believe this can be a “win-win” for all parties. The target timeline is November, and the Administration appears to be moving quickly toward an IPO before year-end. That said, forcing both the SPS and the warrants through the system could invite litigation risk that jeopardizes timing. We also feel cautious about timeline specifics, and we take a view that the IPO will be over “the coming months”. We value Fannie Mae on normalized earnings and tangible book using post-conservatorship assumptions. We assume Treasury’s senior preferred from the 2008 rescue is deemed repaid (no conversion to common) and the junior preferreds convert at par, leaving about 6.4 billion common shares pro forma. On that share count, roughly $18 billion of steady-state net income ($17.0 billion in 2024 and $3.3 billion in 2Q25) equates to ~$2.80 EPS. We estimate tangible common equity at about $85 billion, which is the midpoint of a $75 to $95 billion recapitalization range after settling the senior preferred shares. Based on these factors, we value Fannie Mae using both an earnings multiple and a book multiple, and we compare these to long-term benchmarks and current market conditions.
Historical Multiples as a Baseline
To assess valuation, we focus on the years before conservatorship, from 1997 to 2007. This period best reflects how Fannie might perform after an IPO, since it was publicly owned and had an implicit government backstop. On average, the market valued Fannie at about 12.6 times earnings. In strong markets, this multiple rose to around 20.5, while in weaker times it dropped to about 6.9x. The price-to-tangible book ratio showed a similar pattern, averaging close to 3.9x, with lows near 1.2x and highs up to 7.1x.
Trading multiples pre GFC
We use these bands as a reference point because they show what investors have paid and how they have valued similar businesses. At a 12x multiple, which is close to the 10-year average, $18 billion in profit would mean about $216 billion in equity. At 20x, it would be about $360 billion, and at 7x, around $126 billion. The same pattern appears when we look at book value. With about $85 billion in tangible equity, a 1.2x multiple is close to $100 billion, and 7x is just under $600 billion. This wide range is intentional, and we see similar spreads in other periods, showing what the market has actually paid for businesses like this. Our base case fits within this historical range, and our upside does not rely on the best years.
Earnings and Book Valuations
We use two ways to value Fannie: earnings and book value. For earnings, we apply a price-to-earnings ratio to about $18 billion in yearly profit. For book value, we use a price-to-tangible-book ratio on roughly $85 billion in tangible equity. Looking at both methods helps us double-check our results, since Fannie is a mix of different business types. The company runs a large balance sheet like a bank, but as a government-sponsored enterprise in a market with only two main players and government support, it earns steady profits, more like a utility than a regular lender. In the past, this mix has led to higher price-to-book ratios than banks and has supported its price-to-earnings ratio. We think this trend will continue after the listing.
Starting with earnings. Using a price-to-earnings ratio in the low to mid teens is a reasonable starting point. Applying a 14x multiple to $18 billion gives $252 billion, while a 17x multiple results in $306 billion. Next, we look at book value. Before 2008, the market often valued companies at about four times tangible book value, so we can use a range of 3.5 to 4.5 times. With $85 billion in tangible book, this gives us $298 billion at 3.5x, $340 billion at 4x, and $383 billion at 4.5x. Both approaches suggest a valuation in the low to mid hundreds of billions for a typical post-IPO scenario.
Oversubscription and IPO dynamics
Pulte has called this potentially the largest IPO ever, a deal that every bank wants to be part of. He believes a small float will create a straightforward situation: more buyers than available shares. This should benefit current common shareholders, as early institutions may pay a premium to get in. There is another factor to consider. Many institutional funds cannot trade OTC stocks because of their own mandates, but a primary listing removes that barrier right away. Taken together, these points could push the stock toward the higher end of historical valuations. An oversubscribed book also helps the Treasury sell shares and shows strong market confidence, which can support higher valuations. As more shares become available, the scarcity premium may increase. Overall, we think a strong debut will set a high benchmark for market capitalization. Valuation Scenarios
Conservative Case ($350B combined) – In this scenario, the market is valued at the lower end of historical multiples because of regulatory concerns and higher capital requirements. Fannie would make up around 60% of that, or about $210B. With $18B in earnings, this means a price-to-earnings ratio of 11.7, just below the long-term average. Based on $85B in tangible book value, the price-to-tangible book ratio is about 2.5. Both figures are lower than what the market has paid before. This cautious estimate still gives Fannie a strong starting value, with potential for growth.
Base case ($500B combined):We base our estimate on the lower end of Pulte’s range and our own research. For Fannie, this points to about $300B in equity value. We expect the market to use a reasonable multiple, around 16 to 17 times $18B in earnings or about 3.5 times $85B in tangible book value. This approach seems fair, reflecting strong profits and a stable business, while also factoring in early policy and ERCF uncertainty. At $300B, FNMA shares would probably trade in the high $40s. A $500B combined value would place the GSEs among the world’s largest financial firms, which fits their key role in U.S. housing finance. We feel confident in this outlook, as it matches recent administration numbers and what we see from investor interest.
Mid Case ($600B combined): In this scenario, we expect the IPO market to value the companies near the top of their historical range. Fannie’s share would be around $360B, which works out to about 20 times earnings of $18B, or roughly 4.2 times tangible book value. These figures are close to pre-2008 highs and seem reasonable if investors are willing to take on more risk and see a clear path to growth. If the IPO is oversubscribed, that could push values even higher. After the IPO, stronger returns or restarting dividends could boost confidence and support higher valuations. A combined value of $600B would show that the market sees Fannie and Freddie as strong, independent companies again.
Bull Case ($700B combined): Our most optimistic scenario matches the high end of Pulte’s guidance and assumes that most factors work in Fannie’s favor. In this case, Fannie could reach about $420B in equity, with the market valuing the company at a premium well above historical averages, around 23 times earnings or 5 times tangible book value. While this is higher than usual, it is still below the most extreme levels seen in the 2000s, when Fannie sometimes traded at 20 times earnings and 7 times tangible book value. If there is a small float, strong demand, a clear path to full privatization, and buying driven by scarcity, the stock could reach these valuations. This scenario also assumes that investors expect Fannie to generate more earnings over time through better capital efficiency and steady guarantee fees, and that they are willing to pay for the company’s stable business model. While we do not plan around this outcome, it represents a reasonable upside if market sentiment becomes very positive. Bear Case ($500B combined): In this scenario, we assume 50% of Treasury’s $120B SPS, or $60B, converts to common stock at around $12 per share, similar to the AIG conversion. This would create about 5 billion new shares, increasing the total to roughly 11.4 billion when added to the existing 6.4 billion. If we keep the $300B equity value from the Base Case, the share price would be about $26 to $27. This strengthens ERCF by adding common capital, but it also reduces the per-share value compared to the Base Case. If we use a 12.6x multiple on $18B of earnings, which gives a $227B market cap, the share price would be about $20 with 11.4 billion shares. If all SPS is converted at $12, another 10 billion shares are added, bringing the total to 16.4 billion. At the same market cap, this would mean a share price of $13.8, which is only slightly higher than current levels.
Even using conservative estimates, our calculations suggest Fannie’s common shares are worth much more than their recent trading price. The OTC shares have been around $12 lately. We remain positive on this situation because we believe the market has not yet priced in the most likely result.
The table below summarizes the ranges. Each row shows the combined Fannie + Freddie value, the implied Fannie market cap, implied multiple, and the implied FNMA price assuming about 6.4B shares outstanding.
Valuation Table
Glenco Capital
For share count assumptions, the Conservative, Base, Mid, and Bull scenarios use about 6.4 billion shares, with SPS considered repaid and JPS at par. The Bear scenario uses about 11.4 billion shares, reflecting the conversion of 50% of SPS at $12 per share. All P/E and P/TBV calculations are based on $18 billion in normalized earnings and an ERCF framework, where the requirement is whichever is higher: 3.0% of ATA (leverage) or 10.6% of RWA (CET1), including buffers. Next Steps
The time has come. Back in May, Secretary Bessent said, “After we land some of the peace deals, trade deals, and tax deals, then we will work on this privatization deal.”
This is unfolding while the U.S. housing market struggles under higher rates: home sales sit at multi-year lows, and affordability keeps worsening. Bessent has called it an “all-hands on deck” challenge and even floated the idea of declaring a national housing emergency.
In recent months, we’ve also seen the government take stakes in companies like Intel and Lithium Americas. That brings to mind Bessent’s March conversation on the All-In podcast, where he suggested Fannie and Freddie could be held in a U.S. sovereign wealth fund. If that’s the playbook, a practical question follows: where, exactly, are these new holdings being custodied—and would Fannie and Freddie sit in the same vehicle?
We have also seen Sec. Bessent talking about how “President Trump… creates assets for the American people rather than debt”.)
Given how the Administration is framing these stakes and the narrative around them, the IPO day feels like the best moment to pair two headlines: unveil a U.S. sovereign wealth fund and announce the monetization of the right side of Treasury’s balance sheet. We estimate that the warrant take-out alone could range from about $275 billion to $300 billion, and this amount can be gradually monetized over five years.
Government stake in GSEs Treasury
Over the past few months, Wall Street has approached the Administration about the Fannie and Freddie IPO. Sources report that several banks, including Bank of America, Citigroup, JPMorgan, and Goldman Sachs, have visited the White House to express interest in leading the offering.
Given the size of the deal, the Administration may have already selected the lead banks, and these banks could have started informal meetings with investors. There are no public SEC filings yet, but banks might be quietly gathering interest from institutions. For comparison, when the government unwound the AIG bailout from 2008 to 2012, the Treasury sold large amounts of shares in stages and recovered all the bailout funds. The Fannie and Freddie IPO could use a similar approach with multiple rounds of share sales.
If the Administration moves the GSE stakes into a sovereign wealth fund or a similar structure, private investors may quickly follow. The next steps will likely be to name the lead banks, share an IPO plan, possibly after an update on housing affordability, and then begin building the book. Conclusion
Based on conservative estimates and recent statements from government officials, Fannie’s post-IPO value should be much higher than it is now. With $18 billion in normalized earnings and $85 billion in tangible equity, our basic P/E and P/TBV calculations suggest a market cap in the low to mid hundreds of billions, which would mean a share price around $40 to $50. If demand is strong and the number of shares available is limited, valuations could even reach the high levels seen before 2008, especially if the IPO is oversubscribed. We expect this IPO to be promoted as a rare, 'once-in-a-generation' chance, likely drawing in both institutional and retail investors, particularly if it is presented as a way for Americans to invest in the housing market. Overall, the outlook is positive, and the potential for gains remains as the process moves forward.
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