Freddie Mac shares sink on capital concerns

Shares of the McLean, Va.-based company fell nearly 9 percent on Thursday after a report in the Wall Street Journal highlighted concerns about potential trouble with the company's plans to raise $5.5 billion in capital through stock sales.

Shares dropped $1.42, or 8.9 percent, to close at $14.50 after earlier falling to a 13-year low of $14.35. The company's stock traded at more than $67 a share as recently as May 2007.

Freddie Mac has been waiting to initiate the offerings because its stock is not yet registered with the Securities and Exchange Commission.

The company had been exempted from SEC registration due to its status as a government-chartered company. Freddie Mac had proposed to register with the SEC in 2002, but that process was put on hold due to a multibillion-dollar accounting scandal that came to light in 2003. The scandal led to the replacement of top executives and required the company to restate earnings.

The registration process is "progressing well," Freddie Mac spokeswoman Sharon McHale said Thursday, adding that the timing is "not in our control."

With the second-quarter now closed, it is "unlikely we would do the (capital) raise before we put out our financials," she said. The quarterly results are likely to be released in early to-mid August.

Freddie Mac's government-sponsored sibling, Fannie Mae, which has been registered with the SEC since 2003, raised more than $7 billion in May to fortify its balance sheet. Both companies face steep losses from the mortgage crisis.

Corinne Russell, a spokeswoman for the Office of Federal Housing Enterprise Oversight, which regulates Fannie Mae and Freddie Mac, said the agency "continues to encourage Freddie Mac to raise capital, but we fully understand the appropriateness of a decision to (sell shares) after they publish their second-quarter financials."