In-depth analyses document turmoil in Taxi medallion market

Are lenders reporting inflated asset values?

Jun 03, 2015, 10:36 ET from HVM Capital

BOSTON, June 3, 2015 /PRNewswire/ -- A flurry of new analytical reports by HVM Capital, LLC on the current state of the taxicab industry detail the continued declines in the price of taxi medallions and some curious transactions that raise questions about asset values reported by lenders.

HVM CIO Jay Hickman, who has stirred controversy by publishing research on the taxi medallion industry, says the average New York City taxi-medallion owner has experienced a sharper drop in earnings than anyone has yet admitted. In an article published on, Hickman said the introduction of on-demand car services such as Uber "is shaking incumbent medallion owners and threatening to render the historically bullet-proof medallion a superfluous piece of tin."

A just-published HVM report, Medallion Financial & Credit Unions Behind Above-Market Chicago Taxi Medallion Sales, found some financial institutions were unwilling to lend for Chicago medallion sales at market prices but approved financing for transactions at nearly double those amounts. The three lenders providing new financing at inflated prices include Medallion Financial Corp., Montauk Credit Union and LOMTO Federal Credit Union. Medallion Financial and Signature Bank both subsequently used these higher priced sales to value their entire loan collateral and owned taxi medallion portfolios (marking-to-market is required by the SEC), and we suspect the credit unions similarly relied on them in their own regulatory filings.

Medallion lenders, brokers and fleet owners seem to believe they are supporting taxi medallions by executing transfers at artificially high prices and restructuring troubled loans while impeding transfers at market-based prices. "The taxi medallion ecosystem…is clearly and understandably acting in concert to defend medallion values, mitigate delinquencies and stave off attempted liquidation and attendant write downs," Hickman writes. "The tactics involve a departure from conservative lending standards and should raise eyebrows, at a minimum. The resulting transfer prices have little relationship to actual prices an owner might hope to realize if a cash sale were necessary currently."

Moreover, HVM has found that public companies that lend money for medallion sales have largely excluded mention in their earnings press releases and conference calls of the deteriorating trends in the health of medallion loan and owned medallion portfolios, only disclosing the trends weeks later deep in regulatory filings.

HVM also obtained recent official medallion sales data for Boston and reports the average taxi medallion has lost nearly half its value in the last year. The price in Boston fell from $700,000 in April of 2014, to $350,000 in April of 2015. Sales and transfers used to be regularly published in a local trade paper called Carriage News. But the newsletter ceased publication in March blaming transportation network companies. Similarly, Chicago medallion prices have plummeted from $375,000 in April 2014 to $150,000 in May 2015.

Suing municipalities for lost value of medallions or medallion loans based on the so-called "takings clause" of the Fifth Amendment to the US Constitution has tended to be the last gasp of owners and lenders. This tactic has met with zero historical success, as documented by Christian Samito, an attorney and legal scholar engaged by HVM Capital. Samito concluded "... owners of taxicab medallions have no viable Takings Clause claim against municipalities that permit companies such as Uber and Lyft to operate or do not otherwise prohibit them from doing so." 

Finally, all of the moving parts addressed in these many reports relate to the core question: what are the ultimate implications for taxi medallion cash flows and values? HVM has simplified this otherwise complex issue in Valuing Taxi Medallions: A Simple Framework.

HVM Capital ( publishes activist research on the taxicab medallion industry and capital markets. HVM is not a public policy or regulatory advocate, but rather an observer of market dynamics and predictor of financial & capital markets implications. For full disclosure visit our website.