Taxi-medallions are those certified plates that are affixed to taxis that pass government regulations for licensing, car upkeep, and security camera installation in specific cities such as New York, Chicago, San Francisco, Philadelphia, and Boston. It's been a lucrative business for decades for Medallion Financial Corp. Sales of medallions can cost up to $350,000 per vehicle, and have netted millions in profits in recent years. That is the monopoly that Uber and Lyft are effectively breaking, despite Medallion Financial Corp turning in a profitable earnings report last wee.
Crain's New York looked a little closer at the earning report and saw that Medallion was making broad statements of good fortune.
A closer reading of Medallion’s financial statements reveals that loans for taxi-medallion purchases account for less than 20% of its profits. More than 75% are from high-interest loans for luxury purchases such as recreational vehicles and boats. Medallion Financial also provides financing to Greek diners, Chinese laundries and other immigrant-owned businesses. The medallion portion of Medallion Financial’s business is shrinking.
The average value of medallions sank for the first time in decades, down 20% from its 2013 peak of $1.3 million. Medallion Financial’s share price plummeted 42%, to $9.28, the lowest point in three years. It has since recovered slightly, to $10.79. (from Crain's New York)
A separate report released last Friday by the Taxi and Limousine Commission shows that taxi ridership has gone down by 5% in 2014. Meanwhile, Uber's growth is looking like Medallion's past decade chart: skyrocketing. Uber just earmarked another $1 billion in private funding, and is continuing to expand globally.
“There’s nothing in their business model that requires that much capital,” said Sam Hamadeh, CEO of financial intelligence firm PrivCo told CNN Money. “It feels more like Uber’s history of wanting to not just beat the competition but leave it in an alley for dead.” Lyft is currently attempting to raise a less world-dominating $250 million.