Last week, Federal Housing Finance Authority Director Bill Pulte said government-sponsored financing entities Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) were looking at taking equity stakes in tech companies.
“We have some of the biggest technology and public companies offering equity to Fannie and Freddie in exchange for Fannie and Freddie partnering with them in our business,” Pulte said last Friday at an industry event, according to Bloomberg.
Pulte’s remarks come in the wake of the U.S. government taking 10% stakes in tech giant Intel (INTC) and metal miners Lithium Americas (LAC) and Trilogy Metals (TMQ), along with a 15% stake in rare earth minerals producer MP Materials (MP). The administration has also mulled taking stakes in U.S. defense contractors.
We asked Seeking Alpha analysts Noah Cox of Noah’s Arc Capital Management and Joseph Parrish if they thought Fannie Mae and Freddie Mac should take equity stakes in the tech sector.
Noah Cox: Fannie (OTCQB:FNMA) and Freddie (OTCQB:FMCC) should absolutely not take stakes in tech stocks like Palantir (PLTR), Microsoft (MSFT), or others. They are basically giant mortgage warehousing institutions. While they are owned by the U.S. government, they should not be acting like a hedge fund, full stop.
Joseph Parrish: As Fannie (OTCQB:FNMA) and Freddie (OTCQB:FMCC) are primarily insurance companies, they would hardly be the first to put some of their long-term assets into equities, Berkshire Hathaway (BRK.A) (BRK.B) being a good example.
The tech angle is tricky, given the high growth but also the high valuations for AI, an opportunity that remains tough to value. I think both companies would be better off improving their balance sheets for a couple of years first. If deals to get those stakes are non-cash in nature, they would be much more lucrative to both.