Melrose, Medallions, And Medallion...
Misled consumers make the mistake of using the collapse of medallion lending-driven credit unions as example of TAXI being overvalued.
Pain Ratios for Medallion Lenders: Medallion Delinquencies, TDRs and Nonaccruals/Loan Loss Reserves as % of Enterprise Equity
The largest taxi medallion owner, Melrose Credit Union (“Melrose”), along with two other credit unions and a few large yellow cab operators (“Plaintiffs”), filed a lawsuit last September against NYC TLC. In a series of blog posts targeting Medallion Financial Corporation (NASDAQ: TAXI) yet again, the (anonymous) author targets TAXI in the report, using the case as leverage to emphasize their point that the medallion industry is crumbling and therefore TAXI must be, and so on and so forth...
[In the case of Melrose (etc.) vs. NYC TLC, the Plaintiffs argue that the taxi medallion industry is subject to regulatory burdens that ride-share companies such as Uber (Private: “UBER”) are not subjected to, which have unfairly penalized the taxicab medallion industry.]
These “anonymous blogger bullies” , so to speak, to Medallion Financial Corporation (NASDAQ: “TAXI”) can’t stop publishing articles on how TAXI “refuses to accept the reality of the rapidly crumbling medallion industry,” and points to Melrose as an example. TAXI, in the meantime, has no comment, understandably.
Here's why: TAXI differs from Melrose in that TAXI is not just purely a medallion-lending company but rather quite the contrary, as it has established itself since the 1990s as a very diversified company. With medallion lending not being their main business but on the other hand, only making up about 10% of their company; TAXI, in all actuality, has nothing to fear. The aforementioned article also calls to fact that Montauk Credit Union of New York fell under similar tumultuous times as Melrose; however, what happened in Montauk’s case is that it ended up merging with Beth Page.
The saving grace of merging, it should be acknowledged, is not an uncommon practice. Credit Unions in fact rarely go the way of liquidation but tend to pursue mergers instead. Presumably, whatever company Melrose decides to merge with will make sure to carefully capitalize and diversify in order to dilute the bad business Melrose is bringing to the table. In a two-part article, published early March of this year and again in early April, United Solutions interviewed their Collections Department Manager who said, “Credit unions are known to merge for a number of reasons, including to increase assets and member share. The delinquency may increase, but not a credit union’s capital. NCUA might even disregard inflated numbers or excuse an excessive amount of write-offs.”
TAXI also differs from Melrose because it was not financially threatened; and Melrose, having never diversified from its main income, was threatened by UBER (“PRIVATE: UBER”) which is why it is filing suit. Melrose’s growth over the past several years maps like a backward hockey stick while TAXI remains relatively flat. While Melrose pursued bad business decisions, TAXI chose the safe route and remained steady and consistent as it always has.
The reports for both companies are filed publicly. To put simply, comparing TAXI to Melrose would be like comparing the Garden State Warriors to the New York Knicks. Both teams have similar schedules, but what the Knicks experience in losses has no effect on GSW whatsoever!
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