In the pattern of Bruce Berkowitz (Trades, Portfolio), Bill Ackman(Trades, Portfolio) and Richard Perry (Trades, Portfolio), corporate activist Carl Icahn (Trades, Portfolio) has purchased shares of Fannie Mae (FNMA) and Freddie Mac (FMCC), according to court documents released today. Three of Icahn’s funds in March purchased the shares from the Fairholme Fund (Trades, Portfolio) (FAIRX), which is owned byBruce Berkowitz (Trades, Portfolio).
The Fairholme Fund (Trades, Portfolio) sold a total of 6,828,000 shares of Fannie Mae common stock to Icahn on March 11, at a price of $4.03 per share. It also sold 5,742,000 shares of Freddie Mac common stocks on the same date at $4.04 per share.
The fracas surrounding the two mortgage entities over the past several years developed as the Federal Housing Finance Administration began the process of extricating itself as their conservator, a power that it was granted as part of the Housing Economic Recovery Act of 2008. At that time, to avoid a total implosion of the housing market, the Treasury invested $200 billion in the previously privately owned, publicly traded companies, for a total of 79.9% of their common stock and $1 billion in preferred stock, which carried a 10% dividend.
Though the value of the companies’ shares immediately plummeted, private investors voiced a stronger outcry in 2012, when the FHFA and Treasury announced a “full income sweep” of all future Fannie Mae and Freddie Mac earnings, leaving nothing for shareholders. The numerous legal questions surrounding many of the government’s actions regarding the companies prompted a number of lawsuits.
— Guru Focus