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Icahn Buys Fannie, Freddie Common Shares from Fairholme

JUN 4, 2014 12:17pm ET
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Fairholme Capital Management LLC, the mutual-fund company run by Bruce Berkowitz, sold $51 million in the common shares of mortgage financiers Fannie Mae and Freddie Mac to activist investor Carl Icahn, according to a court filing.

Berkowitz sold $28 million in Fannie shares and $23 million in Freddie shares to funds controlled by Icahn on March 11, Fairholme disclosed in last week's filing. After the sale, Fairholme still held about $141 million in the common shares of the two firms as of March 31, a separate filing with the Securities and Exchange Commission shows, and more than $1.4 billion in their preferred shares.

"Given the essential role of these companies in supporting American homeownership, our views regarding their value remain unchanged," Daniel Schmerin, Fairholme's director of investment research, said today in an emailed statement. Schmerin called the size of the sale "de minimis."

Fairholme, which is based in Miami, is pursuing a federal court challenge to the U.S. practice of sweeping up all of the profits from Fannie Mae and Freddie Mac each quarter. The fund firm and other shareholders are pushing the U.S. to return the companies to private ownership, saying shareholders should benefit from their holdings. The government took over the companies when they were deemed worthless during the financial crisis in 2008.

Fannie Mae's common shares have gained 15% since the date of the sale and Freddie Mac's have rallied 14%.

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