Star investor Michael Burry senses a rapid comeback of two forgotten stocks and can imagine none other than Berkshire Hathaway as a possible investor.
• Michael Burry reveals involvement in Fannie Mae and Freddie Mac
• Another IPO possible
• Berkshire Hathaway as a potential major investor
Star investor Michael Burry once achieved great fame as the market expert who predicted the US real estate bubble would burst in 2007 and profited greatly with a large-scale bet by his hedge fund against the US real estate market. What followed the bursting of the bubble was a financial crisis that spilled over to the entire world.
Two victims of the Great Depression were the two US mortgage lenders Fannie Mae and Freddie Mac, which were placed under state supervision by the US government seventeen years ago in order to save them from bankruptcy. This also resulted in a delisting of the publicly traded common shares from the NYSE. However, off-exchange “over-the-counter” trading remained possible, but the tradable shares are only “conservatorship shares”.
Michael Burry reveals involvement in Fannie Mae and Freddie Mac
As Burry reveals in a Substack article, he is heavily invested in the two companies and holds large positions in the former mortgage giant. He is counting on the two US giants to return to the stock market, which he hopes will provide strong impetus at an operational level. Burry writes: “As soon as every company is freed from capital restrictions through its IPO, I expect a natural acceleration of growth.” Operationally, the two companies acquire mortgages from lenders, then either hold them themselves or turn them into mortgage-backed securities, which they then resell. The resulting proceeds benefit the market by expanding lending and maintaining mortgage flow for homebuyers and multifamily investors.
Specifically, the market expert estimates that a new IPO could achieve a price between one and 1.25 times the book value. One or two years after the stock market comeback, a share price of 1.5 to 2 times the book value is conceivable.
Berkshire Hathaway as a potential major investor
With a view to possible major investors, Burry can imagine none other than investor legend Warren Buffett as a supporter. His investment holding Berkshire Hathaway could build up a large position here in an IPO by Fannie Mae and Freddie Mac. After all, Berkshire has already invested in mortgage companies in the past and even included Fannie Mae among its holdings.
Berkshire Hathaway and Fannie already have an eventful past in common. In fact, an investment decision surrounding Fannie Mae was one of Warren Buffett’s biggest mistakes, as he explained in the 1991 Berkshire shareholder letter. In 1988, Berkshire decided to acquire 30 million Fannie Mae shares, an investment that would have amounted to around 350 to 400 million US dollars. In previous years, Buffett’s investment holding Fannie Mae had held shares, analyzed the business model and also got to know the CEO David Maxwell.
However, after Berkshire acquired seven million shares, the stock price began to rise, which caused Buffett to stop his stock purchases out of frustration. In a further step and because of his aversion to holding small positions, he then sold the seven million Fannie Mae shares. Because of this error, Berkshire lost $1.4 billion by the end of 1991, according to Buffett’s calculations.
Years later in 1998, however, Berkshire reacquired a stake in Fannie Mae and expanded it until 1999. However, in 2000, Berkshire completely divested itself of its stake in Fannie Mae.
Hope for Trump administration
As Burry writes in his article, his optimism about Fannie Mae and Freddie Mac began with the re-election of Donald Trump as US President. For a new IPO to be possible, capital requirements for the two mortgage companies would have to be relaxed, certain preferred shares would have to be converted into common shares and the government’s claims on the companies would have to be reduced, the investor said. Otherwise, the common shares would be “worthless,” especially without the latter. On the one hand, Burry emphasizes in his article that there is still “a final steep, winding and rocky road” until another IPO, but on the other hand, the market expert also says that an IPO is “imminent”.
Recently, star investor Bill Ackman, who is himself a shareholder in the two US companies, shared various suggestions on social media as to how the two mortgage giants could return to the NYSE, but also pointed out that there could still be a long way to go.
A few months ago, the Trump administration fueled speculation about a new IPO for Freddie Mac and Fannie Mae when the US President announced an imminent decision on a possible IPO for the mortgage lenders. “Fannie Mae and Freddie Mac are doing very well, they’re making a lot of money and the time seems to be right,” Trump said at the time via his social media platform Truth Social.
The two stocks have already made big gains in OTC trading this year. So far in 2025, Fannie Mae shares have risen 213.99 percent to 10.30 US dollars, while Freddie Mac shares rose 202.86 percent to 9.89 US dollars at the same time (closing price on December 29, 2025).
It remains to be seen whether a timely IPO will actually take place and whether Berkshire Hathaway will actually approach US mortgage lenders again.
Editorial team finanzen.net
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