The Pershing Square chief thinks that Fairholme Capital and Perry Capital will win their lawsuits re: the government stealing Fannie Mae and Freddie Mac from their shareholders and directing every last cent of profit into Jack Lew's slush fund. And he's figured out how to make even more money from said victory than they will: It begins with not having to pay lawyers to sue the government and ends with common shares doing better than Fairholme and Perry's preferred shares.
In his first extended comments since he bought sizable stakes in Fannie and Freddie, Mr. Ackman said he is convinced shareholders will win their lawsuits against the U.S. government that challenged the Treasury Department’s bailout agreement with the two companies, according to people who heard Mr. Ackman’s remarks.
Mr. Ackman predicted the Supreme Court would side with the plaintiffs if the suit reaches the court. He said the common shares upon a legal victory would then be worth about 10 to 15 times their current value, according to the people who were there….
His remarks place him in a camp with other big shareholders that are bullish on Fannie and Freddie. But the others, including Bruce Berkowitz of Fairholme Capital Management LLC and Richard Perry of Perry Capital LLC, hold preferred shares. Perry and Fairholme are among the firms that sued the U.S. Treasury last year challenging the government’s bailout terms….
Mr. Ackman’s bet on the common shares reflects his conviction that they have more upside than the preferred shares if the companies are ultimately restored as privately owned entities, according to a person familiar with Pershing Square’s thinking.
Ackman Sees Big Upside to Fannie, Freddie Bet [WSJ MoneyBeat blog]