Texas Capital Securities initiated coverage of Fannie Mae with a hold recommendation and a $7 price target, citing continued uncertainty over the government-sponsored enterprise's capital structure.
The firm cited Fannie Mae's current trading price of $6.26, reflecting a 41% year-to-date decline, and a beta of 1.71, indicating elevated volatility. Texas Capital noted that under the existing conservatorship framework—established in 2008—shareholder value remains constrained by government control and liquidation preferences.
The analysis outlined three potential scenarios with varying probabilities. A 20% probability scenario assumes the government forgives the $121 billion senior preferred position, enabling a government share sale at approximately $28 per share. A 15% probability scenario involves converting the senior preferred position into equity, resulting in an estimated $10 per share valuation. The most likely outcome, with a 65% probability, maintains the status quo, leaving common shares with zero value.
Texas Capital also addressed Fannie Mae's junior preferred stock, trading at $10.01 with a $25 par value. The firm noted that in the first two scenarios, the junior preferred position could approach face value. The perpetual non-cumulative junior preferred position totals $19 billion.
The assessment did not rely on earnings per share or business quality metrics, emphasizing instead the structural and regulatory risks tied to Fannie Mae's government conservatorship. Texas Capital highlighted potential policy shifts following the November 2026 midterm elections as a key variable in its outlook.
