The biggest listed provider of loans to New York taxi drivers has posted record annual income, dealing a blow to short-sellers betting that the arrival of Uber and other ride-sharing apps will overturn the yellow-cab industry.
On Tuesday Medallion Financial said that net income in 2014 rose 11 per cent to $28.7m, on a record portfolio of loans worth $1.5bn. Shares in the Nasdaq-listed firm rose 6 per cent, squeezing short-sellers who had borrowed and sold almost one-tenth of the company’s shares in the hope that they could buy them back for less.
President Andy Murstein said that the results were evidence that the company’s core business of financing owners of medallions— which are a licence to drive a yellow cab — was “resilient.”
Shares in the company had lost about a fifth of its value over the past six months, amid an aggressive campaign by Uber to lure away drivers with guaranteed fares of thousands of dollars per week.
“We’ve been in business for 70 years; we’ve seen world wars, oil recessions and 9/11,” he said, adding that Uber was overstating drivers’ likely earnings. “What is remarkable to me is how capital markets don’t care about facts, only perception.”
The spirited performance reflects a fight back from established market players. Last month the FT reported that New York’s Taxi & Limousine Commission has loosened rules on converting older cars into yellow cabs, to stem an exodus of drivers tempted by offers from ride-sharing services that first took to the streets three years ago.
Rising defections to Uber prompted some investors to place aggressive bets against Medallion, which was set up in the 1930s by Mr Murstein’s grandfather, an immigrant from Argentina, who bought one of the first medallions for $10.
Short interest in the stock mounted to 9.6 per cent of the shares outstanding at the end of January, according to Bloomberg data, the highest since the autumn of 2011.
Yet analysts note that Uber is hurting so-called “black-car” and limousine-service operators more than the iconic yellow cabs, which are still doing brisk business. Average daily fares for yellow cabs, including tips, are down just over 4 per cent from their peak in Spring 2013, according to data from the TLC.
Prices for an independent medallion — which requires drivers to put in at least 180 shifts a year — soared to a record $1.05m in 2013. They have since dropped to $800k, but some analysts reckon further falls will be limited, amid a steady decline in transfers. There were just two sales of medallions in January, after a foreclosure and a divorce.
“Every medallion is more than a piece of tin,” said Alexander Twerdahl, an analyst at Sandler O’Neill in New York. “It’s a small business with real cash flows that the owner uses to support their livelihood. People are not going to give them up easily.”
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