Ackman's Pershing Square reports big stakes in Freddie, Fannie

Friday, 15 Nov 2013 | 10:52 AM ET

Nov 15 (Reuters) - Bill Ackman's Pershing Square hedge fund has acquired a nearly 10 percent stake in the common shares of mortgage finance companies Freddie Mac and Fannie Mae , the latest big investor betting that the stock is severely undervalued.

Ackman's move, worth nearly half a billion dollars, comes after Bruce Berkowitz of Fairholme Capital Management announced this week that he and other investors were willing to buy and recapitalize government-controlled Freddie Mac and its sister company, Fannie Mae.

Pershing has a 9.77 percent stake in mortgage insurer Freddie Mac and a 9.98 percent stake in Fannie Mae, according to government filings on Friday.

Shares of Freddie Mac rose roughly 7 percent to $3.10 a share, while Fannie Mae shares rose 9.15 percent to $3.34. Both companies trade on the OTC equity markets.

Berkowitz's Fairholme Funds scooped up preferred shares of Fannie Mae and Freddie Mac with a face value of $3.5 billion at a massive discount, as well as some common shares.

Berkowitz's plan consists of contributing those shares as part of the proposed buyout. Fannie Mae and Freddie Mac have been operating under government conservatorship since September, 2008, and paying nearly all of their profits to the federal government in the form of dividends.

The two mortgage giants are close to paying back much of the $187 billion they received in a taxpayer-funded bailout and still play a dominant role in the U.S. mortgage market by backing the vast majority of newly issued home loans.

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