Is Uber Undermining New York City's Taxi Medallion Racket?

Investors seem to think so.


Andrew Murstein (right), with his father Alvin. |||

"The taxi business is as strong as it's ever been, despite Uber, because people in major cities will still go and stick their hands in the air," Andrew Murstein, the CEO of Medallion Financial told Bloomberg Businessweek in February. "Uber is nothing more than a terrific black car company."

The investors who've been hammering Medallion Financial's stock may see things differently.

Medallion Financial (ticker symbol: TAXI) is the only publicly traded company that owns a large portfolio of New York City taxi medallions, which are the city-issued permits that drivers are required to rent or own in order to operate a yellow cab. Murstein's grandfather and the company's founder, Leon Murstein, purchased his first medallion from the city in 1937 for $10; today a medallion sells for as much as $1.31 million. Since 1980, the price of a medallion has risen more than 1,000 percent, far outpacing the gold market or practically any other type of investment.

Now, thanks to Uber, Gotham's medallion boom may finally be over. Medallion Financial's share price is off about 33 percent from its record high last November, and in the past year, the company's stock is down 13.73 percent. In yesterday's trading, share prices fell over 6%.

Medallion Financial Corp.'s stock price over 6 months. |||

As many observers of Gotham's cab business have noted, Uber's having a bigger impact on livery car service companies that serve the outer boroughs than on yellow cabs, which predominate in Manhattan. But Uber isn't only competing with the yellow taxi industry for passengers; it's also competing for drivers. There are 13,437 taxi medallions in New York City, and about 58 percent of them are "fleet" medallions, meaning they can be bought and sold by a company liked Medallion Financial. According to one industry insider, who spoke on the condition of anonymity, Uber has made it harder for garages to attract new drivers to rent these fleet medallions, which cost (along with a car) about $114 per shift.

Also, Medallion Financial's share price reflects long-term expectations for the industry. On top of its portfolio, the company owns a bank that issues loans to drivers to buy their own "independent" medallions, which sold last year for $967,000 on average. These are generally 25-year loans, so in other words drivers are being asked to take a quarter-century bet worth almost a million dollars that yellow cabs can withstand the Uber threat. If drivers aren't feeling nervous, lenders are: Over the past 9 months, according to my source, some of the leading credit unions that regularly issue medallion loans have tightened standards, demanding 25 percent down payments when 10 percent used to suffice. Inevitably, higher down payments will disqualify certain borrowers, leading to a slack in demand, a fall in prices, and a downgrade of Medallion Financial's credit rating.

Of course, there are many other factors that could explain Medallion Financial's recent plunge. And over the last five years, the company's stock is still up around 70 percent. Either way, as I argued last week in The Daily Beast, taxi cartels are ultimately doomed.

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  1. “people in major cities will still go and stick their hands in the air”

    And wave them about like they just don’t care?

    1. YES! I told that joke before anyone else could!

    2. Word up.

  2. Now I’ll go for the alternate joke:

    “Stand and deliver! Stick your hands in the air and give me your money!”

  3. which cost (along with a car) about $114 per shift

    Shit like that is just amazing. To have to earn over a hundred dollars *just to start making money* is ridiculous – and its all solely due to the limits on medallions.

    1. I got into a long conversation with an NYC black car driver, who was spending his second week in a black car after doing yellow cabs for years, and he told me he was paying $150/shift. (I do a lot of talking to drivers about the economics of taxi driving.)

      1. That also didn’t account for the fact that even after the $150/shift, he was still only getting a percentage and the garage was getting at least as much.

        1. Fuck!

          $150 plus a cut?

          I thought the $150 was bad enough.

          1. Yeah, I forget if he said he was taking home 20% or 30% of fares, minus the $150/shift, but it was one of those numbers. It was something so insanely low I couldn’t believe you made any money at it at all.

            1. Cars have to be returned to garage with a full gas tank too.

              1. That I can see.

      2. I got into a long conversation with an NYC black car driver

        Does his race really matter here?

      3. (I do a lot of talking to drivers about the economics of taxi driving.)

        They must love you.

        1. I work in the service industry. I’ll talk to them about it too. Bar/Restaurant people and taxi drivers are kind of cousins. Besides, at 430 am they’re just happy you’re not puking in the car.

  4. Leon Murstein, purchased his first medallion from the city in 1937 for $10; today a medallion sells for as much as $1.31 million.

    That works out to about…*clickety-click* a 16.5% yearly rate of increase. Ain’t no business like the rent-seeking business, I guess.

  5. I only want the cab driver that will pay me if I answer the trivia questions right. If I get kicked out I can just request an Uber ride the rest of the way,

  6. 25 years = half century?

    Out of the cab!

    1. Curses!

    2. If they were good at math they wouldn’t be driving a cab.

      1. That’s funny on so many different levels.

  7. These are generally 25-year loans, so in other words drivers are being asked to take a half-century bet

    When did centuries change to 50 years? Common Core math?

    1. They showed problem-solving skills, who cares if they get the quote, correct, unquote answer.

  8. I’ve never wanted to see 2 guys wearing barrels and suspenders, more than these two parasites.

  9. Someone should do an article about how ‘commodified’ industries tend to devolve into protection rackets. Seriously, I think it would be a good article and treatment on at least the hows and whys.

  10. If Democrats want a higher minimum wage or higher wages, why not eliminate the medallion system, so drivers don’t have to pay $14.25/hr just for the right to earn a living? Explain to us, the benefit society gets from charging taxi drivers to work?

  11. I think NY should work with ride-sharing companies to help make them legal. go to http://www.lyftvsuber.com/ to try out Uber or Lyft for yourself. compares the two most popular ride-sharing companies. $25 of free ride credit and $500 bonus for new driver sign-up!! drivers can make as much as $35/hr. hope you can see what all the hype is about 🙂 thanks!

  12. Great article! It’s great to see some real data on how the presence of Uber and Lyft affects taxi companies. Ridesharing has changed the way that we think about transportation, and this change has some pitfalls, but innovation always comes with some consequences. I have posted on the Uber and Taxi battle at http://www.lyftdriverpromo.com/driving-tips/

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