Fannie Mae (OTCQB:FNMA) slumps 9.9% and Freddie Mac (OTCQB:FMCC) falls 9.6% as Odeon strategist Dick Bove notes the GSEs’ common equity “will be massively diluted” and there’s no model in place “that suggests that this dilution can be overcome,” he told Bloomberg in an email.
“The primary mortgages industry is in deep disarray and this must be fixed before the secondary market becomes a reasonable investment,” he wrote.
Height Capital Markets initiates Fannie and Freddie common equity at sell, junior preferreds at buy.
In the past six months Freddie has risen 66% and Fannie shares have jumped 72% as investors expect some progress on restructuring and ending government conservatorship status; compares with financial sector median performance of +4.9%.
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