Court approved new law expanding hailing vehicles in NYC
The final court decision approving NYC's authorization of new hailing vehicles in the outer boros and uptown Manhattan may impact Medallion's business. The authorization of additional taxi medallions will also impact business. The question is how? The price of a medallion may drop meaning smaller loans. However, additional medallions may mean more loans. Additionally, since the new hailing vehicles require permits from the City and meters and other specifications, will this mean a whole new market for loans where Medallion will benefit? Hmmm....
"....State Court of Appeals decision allows New York City to proceed with
medallion auction. The New York State Court of Appeals has ruled in favor of
New York City to allow the HAIL Act to proceed. Among other things, the HAIL
Act provisions for the city to auction off 2,000 new taxicab medallions. These
medallions are restricted to handicap accessible vehicles. With an estimated
market price today of about $800,000 per medallion, this equates to over $1.5
billion of new medallions to lend upon.
The windfall that TAXI has been waiting for. The medallion auction is a
positive event for TAXI, mainly because 2,000 new medallions could easily turn
into $200 million plus of new loans for the company, its bread and butter product,
over a 2-3 year period. This assumes that the company maintains market share
and represents 30% medallion loan growth, not including regular loan growth,
over the next three years. Also, historically the price of medallions has risen on
every medallion sale in NYC history. The reason for this is that fleets need to
increase their medallions in order to recognize synergies; there could be up to
5 bids per medallion auctioned off. The auction process will likely take place
over a three year period as to not flood the market with new medallions, and
could begin as soon as 4Q13. Depending on the timing and the success that the
company has during the first year of auctions, it is possible that the company
could want some additional capital to be able to fully take advantage.
E-hail apps officially legal in NYC. Separately, this morning the temporary
restraining order against e-hail apps in NYC was lifted (which allow somebody
to hail a taxi from their smart phone). Although not quantifiable at this time, the
ability to hail a taxi on your phone is an incremental positive for the industry and
thus an incremental positive for TAXI....."
Thanks for the input. I have the same reasoning as you. I also believe that Medallion remains in a good position even as interest rates rise somewhere down the road because of its increasing use of funds from deposits at Medallion Bank. I do have continuing concern about the new legal hailing permits infringing on the taxi business as plenty of taxi fares were made in the outer boros in spite of the past illegal pickups. Will the new legal status mean the permits must charge the same metered fare as taxis...or will their prices undercut taxi fares? No longer live in NYC so not up on it. But...with all those noticeable names on the Board, I hope the Company can work with most situations that NYC can produce.
A final note...wish Medallion provided more information about its "other" business such as soccer teams, car racing, advertising on taxis and other medallion markets where it operates.