What will happen to a common stock holder of Fannie May and Freddie Mac if the government takes over? ?

Question

Will the government set a fixed price for each common stock? How would the valuation be done? BTW, what is the difference between the two companies anyway?

Answer 1

No one can say for certain since it hasn't been decided exactly how a government bailout would work.  I doubt that it would be a complete takeover - buying all outstanding shares.

If a bailout's needed the most likely scenario, IMO, would be for Fannie & Freddie to issue new shares to the government at a discounted price.  With more shares outstanding, that would make individual shares worth even less, but would bring in capital to keep them from failing.