Fitch first gives a "buy" rating to Fannie Mae (FNMA.US) and Freddie Mac (FMCC.US): the market severely underestimates the likelihood of an IPO before 2028.

Ruihui Securities analyst Dan Dolev pointed out that after a period of silence in discussions related to Fannie Mae (FNMA.US) and Freddie Mac (FMCC.US), investors have underestimated the possibility of the two mortgage giants returning to the public market. Dolev has given both companies a "buy" rating for the first time this week, with the underlying assumption that there is a 30% probability of Fannie Mae exiting government regulation by 2028 and a 20% probability for Freddie Mac. He indicated that with the easing of tensions in the US-Iran conflict, the Trump administration may prioritize the listing plans of the two companies. Dolev emphasized in an interview: "The market has underestimated the probability of them going public before 2028, and we believe the actual possibility is slightly higher." He added that with the easing of tensions with Iran, "we will have more time to deal with this." Previously, expectations of the Trump administration ending the 17-year government control had pushed the stock prices of both companies up in 2024-2025, but this year, uncertainty about government plans has led to a sharp decline in stock prices the stock prices of Fannie Mae and Freddie Mac in OTC trading have fallen by nearly 50% from their high points in September of last year. Dolev's "quick exit" plan focuses on the two companies, including a 2.5% capital requirement and government preferred shares that are considered to be repaid by 2028. This plan is most sensitive to the probability of results. He pointed out in a report on May 4 that for every 10% increase in probability, the weighted target price of Fannie Mae would be raised by $3, and Freddie Mac would be raised by $4. Currently, his target price for Fannie Mae is $10 (25% higher than Thursday's closing price) and $9 (about 26% higher than the previous close) for Freddie Mac. Data shows that he is the sixth analyst tracking Fannie Mae and the fifth analyst tracking Freddie Mac. Dolev believes that Fannie Mae and Freddie Mac have extremely high barriers to entry and profitability, making them one of the rarest categories of high-quality assets in the capital market. He emphasized that although these two companies have been under the supervision of the Federal Housing Finance Agency (FHFA) since the 2008 financial crisis, the political momentum to reform the housing finance system in the second term of the Trump administration is beginning to gather. The core of this round's "bullish" logic lies in the rediscovery of the scarcity of assets and profitability. Fannie Mae and Freddie Mac essentially have quasi-monopoly moats and extremely high return on equity (ROE), attributes of a "cash cow" that are not currently reflected in the P/E multiples of their zombie stock status in normal market valuations. Dolev's viewpoint actually throws out a question about the "margin of safety" to the market: if the probability of a successful exit before 2028 is not zero, has the current stock price of just a few dollars already provided enough odds to counter policy uncertainty? At the same time, both companies are also attracting attention from other Wall Street bulls. In March, fund manager Bill Ackman, who has been lobbying the White House for the release of both companies from control, called their valuations "ridiculously low"; and Michael Burry, famous for "The Big Short," while once calling them "toxic twins," revealed a positive stance through Substack in early December, though he later stated that "the IPO may not happen until 2027 at the earliest." However, the uncertainty of the privatization path remains the main pressure on stock prices. FHFA Director Mark Calabria reiterated on Wednesday that any potential IPO decision will ultimately be determined by President Trump. Dolev added, "I have no predictive ability, but if it goes public successfully, its value will far exceed the current level." The complexity of this game lies in the restructuring of its capital structure. Investors' starting point should not just be "whether to go public," but should delve into "how to go public." Currently, the warrants held by the US Treasury are like the sword of Damocles hanging over the heads of common stock shareholders. If the government chooses to exercise them in full, the existing shareholders' equity will be greatly diluted; on the other hand, if the government adopts a more friendly redemption plan for private capital in order to facilitate the IPO, the common stocks traded in the OTC market will experience a double hit.