Shares of Fannie Mae plunged 8.7% to $3.69 Monday after "The Big Short" investor Michael Burry disclosed he had dumped all his common stock in both Fannie Mae and Freddie Mac, warning the shares could become virtually worthless. Burry revealed the move in an Oct. 11 Substack post, shifting into junior preferred shares instead. The swap amounts to a loud vote of no confidence in a stock that had once been a favorite bet on a Trump-era exit from government control.

  • The $238 Billion Anchor Dragging on Common Shareholders. At the heart of the problem is the U.S. Treasury's senior preferred stock — a claim that keeps growing. That liquidation preference rose to $234.2 billion as of June 30, 2026, and was set to increase further to $238.0 billion by September 30, due to automatic quarterly adjustments tied to Fannie's rising net worth.

Citing sell-side research from KBW, Burry said Wall Street's base case is now shifting toward Treasury converting this massive claim into common equity — flooding the market with new shares and leaving current holders with pennies on the dollar. He estimates dilution of at least 90%.

  • Why Burry Didn't Just Walk Away — He Climbed the Capital Ladder. Burry noted that even if Treasury converts, preferred shares still rank ahead of common stock for dividends and in the company's capital structure , meaning they get paid before ordinary shareholders in virtually every scenario. He highlighted that Fannie's junior preferred shares carry $19 billion in par value but trade at just $6 billion in market value , implying meaningful upside if conservatorship ends on any terms short of total wipeout.

  • The Privatization Dream Has Faded. Burry argued that the momentum for exiting conservatorship has been "outranked" by macroeconomic distractions including the Iran conflict, higher interest rates, a weakening housing market, and a tight fiscal situation at Treasury.

FNMA stock is now down more than 63% in 2026 , erasing essentially all post-election speculation.

  • The Math Problem No Rally Can Fix. Fannie Mae has roughly 1.16 billion common shares outstanding. If Treasury fully converts and exercises its warrants, it could receive approximately 4.6 billion new shares , swamping existing holders. Under current conservatorship terms, no dividends are payable to common or junior preferred stockholders , so there is zero cash return while shareholders wait — and the government's claim grows every quarter.

For common holders at $3.69, the question is existential: if the smartest short-seller of a generation is running for higher ground, who exactly is on the other side of this trade?