Fannie Mae in Danger of Stock Delisting
Wednesday, November 19, 2008
How a giant has fallen.
Fannie Mae, once the largest public company in the Washington area and a bedrock of the U.S. financial industry, disclosed yesterday it is at risk of being dropped from the New York Stock Exchange.
The announcement came after the mortgage finance company's share price fell below $1, a violation of exchange rules.
Battered by the decline in the mortgage market, District-based Fannie Mae's shares lost most of their value this year before the government seized them. Fannie Mae's shares closed yesterday at 47 cents.
McLean-based Freddie Mac is also at risk of violating exchange rules, as its shares have fallen below $1 as well, though the company hasn't made an official announcement.
Fannie Mae said it is working with the Federal Housing Finance Agency, which is the regulator in charge of the company, "to explore options relating to this deficiency." The company has until Nov. 26 to let the NYSE know if it plans to take steps to boost its share price above $1. If it does, it will have six months to accomplish the task.
If Fannie fails to boost its stock price, it could be delisted, or removed from the stock exchange. The company would still be traded on one of several electronic markets. But for many companies, that could have devastating effects. Many mutual funds aren't allowed to own companies that aren't listed on an exchange.
The impact for Fannie Mae, whose future is in the hands of Congress, is harder to know. The government suspended dividend payments on the company's shares and took control of nearly 80 percent of them. It left the remaining shares outstanding.
A few weeks after the takeover, NYSE officials visited FHFA headquarters for a meeting with James B. Lockhart III, the agency's director, and the new government-appointed chief executives of Fannie Mae and Freddie Mac.
The exchange wanted to know whether the FHFA and the companies would be able to meet its rules for financial reporting and board structure in order to remain listed. They said they would.
Fannie Mae and Freddie Mac filed timely financial reports last week and are building their boards.
In other news, the FHFA has suspended a requirement that Fannie Mae allocate funds to a new congressional housing trust fund set up to support low-income housing.