‘Big Short’ investor Burry says he owns Fannie, Freddie and sees upside from potential IPOs

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Dec 8 (Reuters) – Investor Michael Burry, known for “The Big Short,” said on Monday he owns sizable positions in Fannie Mae and Freddie Mac and expects them to rise materially if the U.S. mortgage finance giants are taken public again through initial public offerings.

In his Substack newsletter “Cassandra Unchained”, Burry said he expects the IPO price to be between 1 and 1.25 times book value, with the shares potentially trading at 1.5 to 2 times book value within one to two years after listing.

“Once each company is released from capital restraint by their IPOs, I expect growth to accelerate naturally,” Burry wrote.

He said he would not be surprised to see Berkshire Hathaway take a substantial position in any IPOs of the two U.S. housing finance lenders.

Berkshire Hathaway has previously invested in mortgage-related companies and once held a stake in Fannie Mae which it later sold.

Burry also believes that Fannie Mae and Freddie Mac remain critical to the U.S. housing market, noting that the government-sponsored enterprises own or guarantee roughly 62% of outstanding U.S. mortgages and support about 70% of conforming bank loans.

The Trump administration was previously expected to launch IPOs of the two companies later this year, Reuters reported in August.

Fannie and Freddie were created by Congress to support the housing market by ensuring affordable mortgage financing, but crumbled after being severely bruised during the 2008 financial crisis and have since been under federal conservatorship.

They buy mortgages from lenders, holding them in their portfolios or bundling them into mortgage-backed securities for sale, recycling the proceeds to expand lending and keep mortgage credit flowing to homebuyers and multifamily property investors.

(Reporting by Abhinav Parmar in Bengaluru; Editing by Maju Samuel)