‘Big Short’ Investor Michael Burry Discloses Major Stake in Fannie Mae and Freddie Mac

Michael Burry, the investor who famously predicted the subprime mortgage crisis of 2007, says he holds major positions in mortgage giants Fannie Mae and Freddie Mac and believes the companies will soon be re-listed on a major exchange.

“I personally own both Fannie Mae and Freddie Mac common stock in good size,” Burry wrote in his newsletter Monday, outlining why he is now bullish on the two government-sponsored entities.

Burry made millions in the subprime crisis by purchasing credit default swaps on risky mortgage-backed securities that were touted as rock-solid by Wall Street, a saga chronicled in the book and film "The Big Short."

The investor was harshly critical of Fannie and Freddie two decades ago in the run-up to the subprime implosion, but says he turned positive on the stocks after President Donald Trump was elected to his second term.

Fannie and Freddie, created by Congress to bring stability and liquidity to the mortgage market, were publicly traded for years until the 2008 financial crisis, when they entered federal conservatorship under a bailout deal.

Since then, the Federal Housing Finance Agency has exercised total control over the operation of the companies, and an Obama-era rule known as the "net worth sweep" has directed all of their profits to the U.S. Treasury since 2012.

Although common shares of the companies have continued to trade over the counter as "pink sheets," the conditions of the conservatorship rendered them virtually worthless, and the shares traded at around 1% of their former value for many years.

Recently, however, the stocks have attracted speculative interest from investors who hope that Trump will release Fannie and Freddie in a way that will reward common shareholders, including billionaire Trump supporter Bill Ackman.

In May, Trump said he was "giving very serious consideration to bringing Fannie Mae and Freddie Mac public" and has continued to tease an IPO, although details of the plan and the timeline have remained scant.

Burry in his recent post said that he believes a re-listing of Fannie and Freddie "is nearly upon us," but warned "there remains a final steep, windy and rocky climb to IPO for both," citing political and regulatory challenges.

The investor argues that before any IPO, regulators will need to ease Fannie and Freddie’s capital requirements, reduce their control over the companies, and convert certain preferred shares into common stock.

Last month, Burry emerged from years of silence to announce he was shutting down his hedge fund and launching a newsletter on Substack. In recent weeks, he's made a wave of headlines with his warnings of a stock market bubble and bets against Nvidia and Palantir.

His post comes weeks after Ackman floated his own plan to re-list Fannie and Freddie on the NYSE without ending the conservatorship, which would be a windfall scenario for common shareholders.

However, the Trump administration has not publicly embraced that plan, and depending on the path the administration takes, common shareholders could be wiped out entirely.