Keefe Bruyette analyst Bose George says President Trump posted on Truth Social that he is working on taking Fannie Mae (FNMA) and Freddie Mac (FMCC) public and that the implicit guarantee would remain in place post privatization. While “meaningful hurdles exist” to the privatization, solving for the implicit guarantee would be a meaningful step towards making the reform work, the analyst tells investors in a research note. The firm expects the shares to respond positively, but continues to think that the common shares have significant dilution risk if the government sponsored entities were to be privatized. As such, Keefe sees “meaningful downside risk” in the stocks.
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