At the beginning of May, I warned investors that Fannie Mae
The process begins
The delisting will not occur immediately, but once it does, the stocks will trade on the over-the-counter bulletin board (OTC BB), a network of "market-makers," securities firms that are willing to buy and sell the shares. You should still be able to trade them through your online broker.
Nevertheless, there are substantial costs associated with trading on the OTC BB. One study, based on a sample of shares delisted in 2002, found that the spread between bid and ask prices tripled in percentage terms and share volatility doubled. In that regard, now is as good a time as any to ask yourself if you want to continue speculating on these shares or whether it's time to cut your losses and move onto something with a better expectation of a proper return.
The failed hybrid model
Fannie and Freddie, which were privately owned with a public mission to encourage home ownership, proved to be an unstable hybrid. Now that they are squarely under government conservatorship, it is right that their shares should no longer trade on a national exchange: The companies are no longer being run for the benefit of shareholders, not to mention that the shares are worthless and purely a vehicle for speculation.
An honest speculation
This situation differs from another firm that also received tens of billions of dollars in government support, AIG
There are ways to achieve high returns other than speculating on worthless shares. This could be your next big winner.
Fool contributor Alex Dumortier has no beneficial interest in any of the stocks mentioned in this article. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.