Bill Ackman lit the fire and Bill Pulte supercharged it.
Their influence has helped push retail traders toward Fannie Mae and Freddie Mac, whose shares have soared more than 500% since Donald Trump’s election a year ago. But now, as stock markets are gripped by volatility and crypto assets suffer their worst rout in years, those same investors are fleeing.
Thursday’s selloff and Friday’s fresh losses reminded us that retail traders’ fervor — stoked in part by Pulte, director of the Federal Housing Finance Agency — can quickly turn sour. Ackman, a billionaire hedge fund manager, published a post on social media this week, blaming forced liquidations and margin calls in the cryptocurrency market for the falling prices on the mortgage giants.
“I underestimated Fannie and Freddie’s (“F2”) exposure to crypto, not in their balance sheet, but in their shareholder base,” Ackman said on X.
Ackman’s theory of the drawdown — that cryptocurrency investors facing margin calls had to sell other assets to raise cash — was echoed by some on Wall Street who saw stocks fall more than 10% on Thursday. This came as Bitcoin was on track for its worst monthly performance since a series of corporate collapses rocked the sector in 2022.
Read: Ackman Fannie-Freddie Plan Boosts Stocks After White House Pitch
“There was clearly a lot more leverage to be had in crypto and recent high-flying equity themes,” Charlie McElligott, multi-asset strategist at Nomura, wrote in a note to clients Friday.
The pair’s shares have risen sixfold since, just before Trump’s election, Pulte will help oversee a process to privatize Fannie Mae and Freddie Mac after nearly two decades of government control. The Trump administration has said it is a priority, but has remained tight-lipped on the details and timeline.
Pulte has frequently promoted the idea, with traders studying his social media posts for clues as to what is likely to come next.
It all echoes the first stock meme phenomenon that emerged during the pandemic, when bored young people, stuck at home and flush with stimulus checks, began speculating in the stock market, sparking wild runs on GameStop Corp. shares. and AMC Entertainment Holdings Inc., among others.
Read more: Pulte Social Media Posts Become Must-Have for Stock Traders
Fannie and Freddie have had a similarly tumultuous ride over the past year, including a nearly 40% decline since the peak on 9/11, when Commerce Secretary Howard Lutnick raised the prospect of taking them public. The volatility is also due in part to the fact that the shares have been trading over-the-counter since they were delisted from the New York Stock Exchange in 2010, limiting the pool of potential investors and the liquidity of the shares.
Big swings are commonplace for Freddie and Fannie. For stocks to experience a move of two standard deviations — which only happens 5% of the time — they must jump or fall at least 10%, according to data compiled by Bloomberg. By comparison, such a move would amount to just over 2% for McDonald’s Corp. and around 3% for Microsoft Corp.
Ackman, the founder of Pershing Square Capital Management, has long encouraged buying Fannie Mae and rival Freddie Mac, saying the stocks are cheap and will recover when the U.S. government liquidates its massive holdings. Although Ackman has been a proponent of the IPO of both companies in recent months and weeks, he said Tuesday that it would take “a lot of time” for the government to “deliberately execute it.”
