Trump's "new policy" priority shift, Fannie Mae and Freddie Mac's stock prices plummeted 70% after their failed IPO dreams!

Note that the stock prices of Fannie Mae and Freddie Mac have dropped by about 70% in the past six months, hitting their lowest levels in over a year. Investors had expressed doubts about the Trump administration's efforts to sell more stock of these two mortgage financing giants to the public. Since mid-September, the stock prices of these two companies have been in a steep decline. It was previously believed that these two institutions might go public in 2025, but this expectation has not materialized. Another class of preferred stocks held mainly by long-term institutional investors has also seen a decline. The perpetual preferred stock of Freddie Mac has fallen by about 23% in the past month, bringing its price close to the trading levels just days after Trump won the election. The Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac, did not immediately respond to requests for comment. BTIG analyst Eric Hagen said that due to the decreasing transparency of the companies' plans, these institutions are facing a "complete collapse." Furthermore, their stock prices often drop when the 10-year Treasury bond yield, used as a benchmark for borrowing costs, rises. As demonstrated on Wednesday, after the Federal Reserve kept interest rates unchanged, Fed Chair Jerome Powell made a speech, leading to an uptick in yields. Hagen said via email, "These stocks are actually becoming more negatively correlated with rates, largely due to the market interpreting that Trump may exert greater control over the companies to offset the impact of rising rates." Since the global financial crisis, Fannie Mae and Freddie Mac have been under Washington's control. Last August, there were reports that the White House planned to conduct an IPO, valuing these two enterprises at around $500 billion or more, and involving the sale of 5% to 15% of shares to raise about $30 billion. Following this news, their stock prices soared. However, since then, few details have been released, and the government's attention seems to have shifted to other priorities, such as the Iran conflict. The rise in mortgage rates may also make housing affordability a pressing issue, which could make officials cautious about pushing forward with a stock issuance plan, as it may raise mortgage rates due to market skepticism about government support. Evercore ISI analyst Matthew Akers said, "The short-term outlook is uncertain if decisions on the next steps for government-sponsored enterprises (GSEs) are not made. But there is still ample time in this administration for GSEs to become a priority again." Last week, Wedbush analyst Henry Coffey suggested that the IPO of these two mortgage institutions may not launch until after the November midterm elections in the US. With Trump "clearly focused on other matters," Coffey expects that if the government makes any statements about Fannie Mae and Freddie Mac, the focus will be on "lowering the costs of mortgage financing for homeowners." He also downgraded the target price of the common stocks of these two companies. Economist and investor Peter Schiff further raised concerns on Tuesday. In a post on the X platform, he wrote, "Real privatization is not possible. Any move to privatize profits while socializing losses, which make taxpayers bear the burden, will raise mortgage rates and lower house prices." He concluded, "Trump will not stick to it." Earlier this week, Oksenholt Capital Management announced that it had "taken profits on a portion of its holdings of Fannie Mae common stock," but added, "we remain bullish on both these enterprises and their subordinated preferred stocks." The company stated on Monday that Oksenholt and its affiliated investment vehicles are among the largest holders of Freddie Mac common stock. It is not entirely clear what specific trigger factors caused the common stocks to drop by more than 20% this week. Evercore analyst Akers suggested that a potential catalyst could be the lack of detailed plans for public stock offerings in a strategic report by the FHFA. If this is indeed the case, investors may have overreacted, as such a document is not typically released for major policy updates. Last week, Trump signed executive orders aimed at increasing housing affordability, as part of efforts to alleviate the pressure of rising living costs amid the Iran conflict and market volatility. These directives did not mention an IPO or any other plans to release Fannie Mae and Freddie Mac.