Ride Sharing Services Blamed for Demise of Boston's Venerable Carriage News

HVM Capital Asks: More Damage to Come?

Mar 11, 2015, 13:32 ET from HVM Capital

BOSTON, March 11, 2015 /PRNewswire/ -- In yet another sign that the traditional taxi industry is being disrupted by Uber and other ride sharing services, Carriage News has ceased publication after 45 years of an indispensable role in covering the Boston taxi industry. 

Publisher Bob Keeley did not mince words in assigning blame: "The demise of Carriage News can be laid directly at the feet of the TNCs [Transportation Network Companies] and the do-nothing politicians who allow these ... operations to continue to erode the taxi industry."

Other points raised in the farewell editorial were:

  • Because the TNCs are not required to have medallions before engaging in their "taxi" services, the face value of a Boston taxi medallion has fallen through the floor ...
  • A year ago at this time, Boston medallions were selling for $700,000 ... There are rumors [since confirmed] ... the asking price ... is as low as $350,000 and, yet, there are still no buyers to be found ...
  • The lending institutions are not lending any longer, nor are they advertising ...
  • Carriage News may be the first fatality of the TNC wars, but it will not be the last.

In a remarkably ironic twist, Taxicab Times, a national trade periodical still in print, recently published a front page Opinion piece declaring "... Uber Will Implode," while the back cover was occupied by a full page Uber advertisement. Apparently some still see value advertising in taxi industry trade journals.

HVM Capital has published several research reports on the disruptive and deleterious impact on taxicab medallion cash flows and market values owing to the market entry of TNCs. New supply means dilution of taxi revenues. Taxicab meter revenue is expected to decline until higher-cost taxis are no longer earning enough to cover the cost of medallions. The combination of negative equity and negative free cash flow for taxi-medallion-bearing vehicles will compel medallion-owner-drivers to default on loans.

In addition, the opportunity for medallion-leasing drivers to earn more per hour with greater driving flexibility, will continue to lead a driver exodus to ride share networks. This endgame points to loans collateralized by medallions being written down and eventually foreclosed in large numbers. According to Jay Hickman, of HVM Capital, "we expect lenders like Medallion Financial Corporation, Signature Bank and many credit unions to struggle recovering much of the original medallion loan par values when selling into illiquid and deteriorating secondary markets, and seeking to enforce personal guarantees against financially troubled defaulters."

HVM Capital (www.hvmcapital.com) publishes activist research on the taxicab medallion industry and capital markets. It is not a public policy or regulatory advocate, but rather an observer of market dynamics and predictor of financial & capital markets implications.

Contact: Doug Bailey, DBMediaStrategies Inc.