Shares of both companies have plunged in premarket trading.
Freddie and Fannie every two shares have almost quadrupled in value this month, with hundreds of millions of shares change hands daily. The rise came even though some analysts argue that the company shares are worthless because their debts to the government are too heavy.
"We reiterate our 'Lighten' rating" on both, wrote analyst Paul Miller in a note to investors Monday. "There is no fundamental value remaining in (Fannie) and (Freddie), especially since the government owns 80 percent of each company."
In the operations of pre-marketing, Freddie shares gave up 17 cents, or 7.1 percent, to $ 2.23. Fannie stock dropped 15 cents, or 7.4 percent, to $ 1.89.
Miller expects the Government to make further investments in companies in the coming weeks beyond the $ 96.3 billion it has already injected. This capital must be repaid if the two will be independent companies, he said, but both are sinking under the weight of the cost of credit growing.
"Both companies are under-reserved to incur losses to come," he said.
Shares are up sharply in expectation of a share consolidation, said Mr. Miller, but noted that company management has said in regulatory filings that they do not favor such an approach. Regulators, too, will probably not support a reverse stock split, he said, because they do not want to "create a false sense of value" in stocks.
A reverse stock split reduces the number of shares outstanding and increases the share price proportionately. [ Fannie Mae, Freddie Mac : No fundamental value to shares ]
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