Fannie Mae-No Politics (FNMA)

[obiterdictum]

The Perry Capital lawsuit focuses on having the third amendment vacated in its entirety.

Vacating the third amendment benefits all shareholders and returns value to all securities, preferred and common. For example this would include accrued dividends and increased market value to both the preferred and common stock. The liquidation preference order of compensation (preferred then common) is standard practice and not unique or special to the PSPAs.

The very basis of the Perry Capital lawsuit is to benefit all GSE securities, all shareholders, preferred and common (including Treasury's if the warrant is exercised). The opening complaint says:

By this complaint, Perry Capital seeks to prevent Defendants from giving effect to or enforcing the so-called Third Amendment to preferred stock purchase agreements (“PSPAs”) executed by Treasury and the FHFA, acting as conservator for the Companies. The Third Amendment fundamentally and unfairly alters the structure and nature of the securities Treasury purchased under the PSPAs, impermissibly destroys value in all of the Companies’ privately held securities, and illegally begins to liquidate the Companies. This blatant overreach by the federal government to seize all of the Companies’ profits at the expense of the Companies and all of their private investors is unlawful and must be stopped.

Regarding Ackman
Ackman shorted FNMA and FMCC in 2008 in stock and junior debt securities. This he publicly declared.

I have researched Ackman's trading activities and find no mention of Ackman shorting Fannie Mae or Freddie Mac since that time or on or after May 29th.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aMFR4wZIAChU - Bloomberg article
http://www.cnbc.com/id/25685589 - CNBC Article
http://video.cnbc.com/gallery/?video=793726867 - CNBC Video
http://www.cnbc.com/id/25688918 - Slideshow of 2008 Ackman Plan - click through.

That is not to say he did not short the GSE common stock since there is no evidence substantiating that he did not. However, there is no evidence available that he or his trading broker or proxy did short the common shares this year.

Ackman's style tends to be public and when he does things on a large scale where 5% or more of a companies stock is involved he makes an announcement to increase the result or furnishes the required SC 13D to evidence his actual commitment.

As mentioned months ago when Berkowitz's mutual fund and specific hedge funds were buying preferred and common, this activity and these events were not something to be excited about since such purchases (or shorting or both) are aimed to make profit for the funds and not for the general retail shareholders. These types will do all that they can to make a profit for their oftimes exclusive investors. There is no secret about this. However, everyone was saying smart money and big money and.......and imagining that great things will come from their participation.

The arrival of stable institutional funds and long term investors is a cause célèbre for longs. Hedge fund entry is useful for day and short term traders.