Pershing Square Inc. on Federal National Mortgage Association

Pershing Square considers Fannie Mae an asymmetric special situation with the potential to generate returns exceeding ten times its current share price if the company exits government conservatorship and achieves a conventional public-market valuation. The fund argues that Fannie Mae's government-sponsored mortgage guarantee business is structurally attractive, with durable recurring fee income and low historical credit losses. Together with Freddie Mac, the government-sponsored enterprises have accumulated more than $200 billion of shareholder equity, and Pershing Square expects combined capital to exceed $375 billion within five years. Despite these favorable fundamentals, the companies trade at approximately 1.5 times earnings because investors primarily value them according to the perceived probability of political action rather than their operating profitability. The fund believes the administration has sufficient executive authority and political incentives to relist and release both companies from conservatorship before the end of the presidential term. Pershing Square views the recent share price collapse as a consequence of diminished investor expectations about the timing of policy action rather than deterioration in the underlying businesses.