Bill Ackman stoked the fire, and Bill Pulte added fuel to it.
Their influence helps drive retail traders Fannie Mae and Freddie MacIts shares have soared more than 500% since Donald Trump was elected a year ago. But now, as the stock market becomes volatile and crypto assets suffer their worst slump in years, those investors are fleeing.
Thursday’s frenzied sell-off and Friday’s further losses were a reminder of the fervor of retail traders – whip it up Proposed in part by Federal Housing Finance Agency Administrator Pulte — could soon turn sour. Billionaire hedge fund manager Ackman blamed forced liquidations and margin calls in the cryptocurrency market for the mortgage giant’s price decline in a social media post this week.
“I underestimated Fannie Mae and Freddie Mac’s (‘F2’) exposure to cryptocurrencies, not on their balance sheets, but on their shareholder base,” Ackman said. X.
Ackman’s pullback thesis – that leveraged cryptocurrency investors facing margin calls must sell other assets to raise cash – was echoed by some on Wall Street, who saw the stock drop more than 10% on Thursday. The incident comes as Bitcoin faces its worst monthly performance since a series of corporate failures rocked the industry in 2022.
read: Ackman’s Fannie Mae plan rises after White House pitch
“There is clearly more leverage in cryptocurrencies and the recent run-up equity themes,” Nomura cross-asset strategist Charlie McElligott wrote in a note to clients on Friday.
Shares in the two companies have risen sixfold since the eve of Trump’s election on a bet that Pulte would help oversee the privatization of Fannie Mae and Freddie Mac after nearly two decades of government control. The Trump administration has said it is a priority but has remained mum on specifics and timelines.
Pulte frequently promoted the idea, and stock traders studied his social media posts for clues about what might happen next.
It all echoes the first meme-stock phenomenon that emerged during the pandemic, when bored young people stuck at home with stimulus checks in hand began speculating on the stock market, driving the stock market into a wild rally. game station company and AMC Entertainment Holdings Company etc.
Read more: Pulte’s social media posts become must-watch content for stock traders
Shares of Fannie Mae and Freddie Mac have experienced similar turbulence over the past year, falling nearly 40% since peaking on Sept. 11 when Commerce Secretary Howard Lutnick talked about the prospect of taking them public. Part of the reason for the volatility is that the shares have been traded over the counter since they were delisted from the New York Stock Exchange in 2010, limiting the pool of potential investors and liquidity in the shares.
Large swings are common for Freddie Mac and Fannie Mae. For stocks to experience a two-standard-deviation move (which happens only 5% of the time), they need to move up or down at least 10%, according to data compiled by Bloomberg. By comparison, McDonald’s Corp.’s move would be just over 2%, while McDonald’s Corp.’s move would be about 3%. Microsoft company
Founder of Ackerman Pershing Square Capital Managementhas long advocated buying into Fannie Mae and its rivals Freddie Macsaying the stocks are cheap and will rise when the U.S. government unwinds its large stake. While Ackman has backed the listings of both companies in recent months and weeks, he said on Tuesday the government would need “a lot of time” to “execute prudently.”