This morning, the Federal Housing Finance Agency ordered Fannie Mae and Freddie Mac, the government-sponsored enterprises that support the housing market, to delist “their common and preferred stock from the New York Stock Exchange and any other national securities exchange.”
Why? The stock prices were rock-bottom, and the FHFA did not see any point to “curing” the stock price by combining shares or by any other maneuver. Plus, the companies are capitalized by taxpayers via the Treasury, not the stock market, now. Their *raison d’etre *is to stabilize the housing market, not to make profits. In the past five years, both stocks have fallen more than 99 percent. And the news sent the share prices even lower. As of 10:30 this morning, FNM (Fannie’s stock) had fallen 42 percent, to 54 cents a share. FRE (Freddie’s stock) had fallen 46 percent, to 67 cents a share.
“FHFA’s determination to direct each company to delist does not constitute any reflection on either Enterprise’s current performance or future direction, nor does delisting imply any other findings or determination on the part of FHFA as regulator or conservator,” the agency’s director, Edward DeMarco, said in a press release. “The determination to direct delisting is related to stock exchange requirements for maintaining price levels and curing deficiencies.”
From the release:
Each Enterprise’s common stock price has hovered near the New York Stock Exchange (NYSE) minimum average closing price requirement of $1 over thirty trading days for most months since the conservatorships were established in September 2008. Most recently, Fannie Mae’s closing stock price has been below the required $1 average price for the past thirty trading days. Per NYSE rules, a company in that condition must either drop from the exchange or undertake a ‘cure’ to restore the stock price above the $1 mark if it does not meet the NYSE’s minimum price requirements. The alternatives for putting in place such a cure do not assure maintaining the minimum price level or avoiding loss of shareholder value.
In view of Freddie Mac’s share price being close to the $1 mark and the common situation of both companies operating in conservatorship with support from the Treasury Department through the Senior Preferred Stock Purchase Agreements, FHFA has determined that Freddie Mac should also initiate an orderly delisting process.
“A voluntary delisting at this time simply makes sense and fits with the goal of a conservatorship to preserve and conserve assets,” said DeMarco. Each Enterprise’s stock will continue to trade, but through a different trading mechanism.
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