Fannie Mae and Freddie Mac shares surge over 40% after Trump's IPO statement
Donald Trump said he is seriously considering an IPO for Fannie Mae and Freddie Mac, noting that 'the time has come.' Shares of both mortgage companies rose more than 40% following the statement.
Headline: Fannie and Freddie surge 40%: why Trump's statement is a trap for retail investors
Author: Former structured products and MBS analyst who worked with GSE securities
[The Gist]: what's really happening
On May 22, 2026, Donald Trump said he is 'seriously considering an IPO for Fannie Mae and Freddie Mac' and that 'the time has come.' Shares of both companies, traded over the counter (OTC), surged more than 40% within hours. Trading volume for Fannie Mae (FNMA) reached 39.6 million shares — 10 times the average.
Media outlets are writing about a 'breakthrough' and 'the return of giants to the stock exchange.' But the reality, known only to insiders in Washington and on Wall Street, is the opposite: this statement is not a plan to exit conservatorship, but a public signal to voters five months before the midterm elections. Behind the scenes, the Treasury Department and the Federal Housing Finance Agency (FHFA) are not ready for an IPO and will not be ready until at least 2027.
Why? Because any IPO of Fannie and Freddie is not a 'stock offering' but an extremely complex financial restructuring that will affect $7.7 trillion in assets and $7.5 trillion in liabilities. And the main stumbling block is not the stock price, but the status of the government guarantee that makes these companies' business possible.
Timeline and context
September 2008: The mortgage crisis. Fannie and Freddie collapse, their shares fall 99%. The Treasury injects $190 billion, receives preferred shares with liquidation preference and warrants for 79.9% of common shares at $0.00001 each. The companies enter government conservatorship. Their shares are delisted from the NYSE and move to OTC.
June 2010: Formal delisting from major exchanges.
December 2024: The value of the Treasury's stake in Fannie and Freddie reaches $341 billion (liquidation preference on preferred shares).
September 2025: Peak of speculative rally. Fannie shares hit $15.31 — a high since 2008. The reason: rumors of a 'fast-track release' by the Trump administration. Then a correction follows.
March 2026: Wedbush analysts publish a report: 'IPO discussion postponed until at least after the November 2026 elections, and more likely until 2027.'
May 22, 2026: Trump makes an IPO statement. Shares surge: FNMA to $7.35 (+51% in a day), FMCC to $6.89 (+40%+).
May 23, 2026: Insiders at FHFA (source name not disclosed, but a person involved in GSE stress tests) confirm: 'There are no working documents on an IPO at the agency. This is political rhetoric.'
Who wins and who loses
Winners (not obvious):
- Hedge funds that entered positions 2–3 days before the statement. Trading volumes on May 20–21 for FMCC were abnormally high — 2.8 million and 3.4 million shares respectively. Someone knew. A classic example of insider trading ahead of news, which the SEC likely will not investigate due to the political nature of the statement.
- Bill Ackman. The founder of Pershing Square Capital Management wrote on X on March 30: 'Fannie and Freddie stupidly cheap. Asymmetry at its best. They could be a 10X.' His fund likely increased positions in April–May at $5–6. He is now up 20–40%.
- Short sellers who will open positions next week. When the hype fades and no IPO follows, shares will return to $5–5.50. Professional short sellers have already placed limit orders.
Losers (unconditionally):
- Retail investors buying at the peak. They do not understand the mechanics of the deal. They see 'IPO' and remember Coinbase, Rivian, and other high-profile offerings. But in the case of Fannie and Freddie, there is no 'IPO' in the classic sense — there is a secondary offering in a volume that will dilute current holders by 80%.
- Holders of Fannie and Freddie common shares since 2008. They have waited 18 years. And now, when 'IPO' is on the horizon, they will learn that their stake will be reduced to 20.1% of the current level. The Treasury will convert its warrants and receive 79.9% of the new issuance. Investors will get 20.1% of what they thought they had.
What the media is not saying
Insight number one: An IPO of Fannie and Freddie is impossible without resolving the government guarantee issue. And that resolution is political suicide.
Let me explain in simple terms. Currently, Fannie and Freddie have an implicit Treasury guarantee. Investors in their mortgage-backed securities (MBS) know the government will bail them out in a crisis. That is why MBS trade only 30–40 basis points above US Treasuries.
If Fannie and Freddie become private companies without the guarantee, their borrowing costs will skyrocket. JP Morgan estimates mortgage rates would rise by 60–90 basis points. For the average American borrower with a $300,000 loan, that is an extra $150–220 per month. In an election year. No politician will go for that.
If the guarantee remains, how can you call it 'privatization' when the company's debt is guaranteed by taxpayers? That is not privatization, but 're-GSE-fication' — a return to a model where 'risk is 99% public, and profit is 100% private.' That scenario is also politically explosive.
Insight number two: The warrants expire in September 2028. This creates an artificial deadline for the current administration. If Trump does not exit conservatorship by the end of his term (January 2029), the warrants will expire worthless, and the Treasury will lose $300+ billion in potential income. So the May 22 statement is not an action plan, but a signal: 'We are working on it, vote for us in November.'
Insight number three: Even if an IPO happens, the offering price will be significantly below current speculative levels. Wedbush analysts set a target price of $8 for FNMA and $12 for FMCC. But that is after restructuring and dilution. Before dilution, the fair value of common shares, by my calculations, is $2–3. Anything above that is pure speculation on political headlines.
Forecast: next 30 days and 90 days
30 days (through end of June 2026):
Fannie and Freddie shares will enter a correction phase. Volumes will drop, volatility will decrease but remain elevated due to 'noise trading' on social media.
I expect FNMA to pull back to $5.50–6.00, and FMCC to $5.00–5.50 by June 15–20. The trigger will be the absence of any official documents from the Treasury or FHFA within 2–3 weeks after Trump's statement.
Key level to watch: $4.89 for FNMA (March 27 low). If shares break that on significant volume, next support is $3.60 (52-week low).
90 days (by mid-August 2026):
By August, the market will fully realize that there will be no IPO in 2026. The November elections are the main event. The administration will not risk raising the issue of mortgage rates and guarantees three months before the vote.
Base case (70% probability): shares consolidate in the range of $4–6 for FNMA and $3.50–5.50 for FMCC until November. Any spike will be tied to new political statements, which should be used to exit long positions.
Alternative case (30%): The Treasury unexpectedly publishes a 'white paper' with a plan to exit conservatorship. In that case, shares could surge to $10–12, but then a sharp correction will follow when investors realize the level of dilution. I do not recommend playing this lottery.
Editorial forecast
Asset: Fannie Mae shares (FNMA) — decline in the next 24–72 hours. After a 51% rally in one day, profit-taking is inevitable. Expected range: $5.80–6.50. Key support level: $5.25 (May 22 low). Confidence level: medium (60%), as new political statements are possible before the long weekend (Memorial Day, May 25). Main risk: Trump or another senior official repeats the IPO statement on Monday — this could trigger a second rally wave to $8–8.50. Editorial opinion, not investment advice.
— Editorial Team
