Fannie, Freddie Shares Slide on Analyst's Report

By Dawn Kopecki
Bloomberg News
Wednesday, September 2, 2009

Shares of Fannie Mae and Freddie Mac tumbled Tuesday after an analyst published a note saying the mortgage-finance companies have no "underlying value" to justify their share prices more than tripling in value in August.

FBR Capital Markets' Paul Miller wrote in a note to investors that "[there] is no fundamental value remaining in Fannie and Freddie, particularly since the government owns 80 percent of each company."

District-based Fannie Mae dropped 34 cents, or 17.62 percent, to $1.59 in New York Stock Exchange trading. McLean-based Freddie Mac declined 39 cents, or 17.03 percent, to $1.90.

By last week, the shares had climbed to their highest levels since regulators seized Fannie Mae and Freddie Mac last September. Fannie Mae shares closed at $2.04 on Friday, up 252 percent for the month. Freddie Mac finished that day at $2.40, a 287 percent jump.

Investor speculation that Fannie Mae and Freddie Mac would pursue reverse stock splits to boost their share prices is overblown, and there's "no relief in sight" to the companies' losses, Miller said.

Miller noted that the companies have warned in regulatory filings that their directors did not support reverse splits.

The companies have booked a combined $165.3 billion in quarterly losses over the past two years and have received or requested $95.6 billion in taxpayer aid.

The Obama administration is considering options to restructure the companies, including liquidation or splitting off their bad assets into a separate government-backed entity.

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