Investor Michael Burry, known for his role in The Big Short, warns that Fannie Mae and Freddie Mac stocks may become worthless. Burry noted that both companies have formed a head-and-shoulders chart pattern, which traders typically interpret as the conclusion of a rally.
The shares of both mortgage giants experienced significant volatility following the 2024 US election. Fannie Mae rose to a peak of $15.31 on September 11, 2025, but closed at $4.04 on Friday, marking a 74% decline from its high. Freddie Mac followed a similar trajectory, falling from a peak of $14.15 to $3.68.
Burry highlighted that the US Treasury holds senior preferred stock in these companies, which must be repaid before ordinary shareholders receive any value. He cited analysis from KBW suggesting the Treasury may convert its stake into common stock, which could dilute existing shareholders by at least 90%.
The investor confirmed he executed a trade involving both companies this week, though he did not disclose the specific direction of the move. Burry previously held significant stakes in both firms and had expressed optimism in December 2025 that public listings would support their share prices.
