Medallion Financial Corp., rather than being disrupted, has instead erupted. Shares of the specialty finance company — which is known for offering consumer loans to purchase taxi medallions, although that’s a shrinking part of its business — have rallied sharply this year, recently closing near a three-year high. Some of that strength may be attributable to two unexpected sources: Uber and Lyft. Both newly public ride-sharing companies have struggled since their debuts. While analysts were quick to say that ride-sharing still posed a considerable competitive threat to traditional taxi businesses, the tepid response to the stocks has been viewed as a positive. “Sentiment was so bullish toward Lyft and Uber that things could only go right for them, which meant things could only go wrong for Medallion,” Paul Hickey, co-founder of Bespoke Investment Group, said in a phone interview. “But now that they’ve tripped coming out of the gates, it seems like things have turned. If things are going badly at the ride-sharing companies, maybe it won’t be an all-out rout of traditional taxi companies, which is what the concern used to be.” Shares of Medallion, which used to trade under the ticker symbol TAXI, rose as much as 1.5% on Tuesday. The company has gained nearly 20% from a recent low just three weeks ago, and more than 80% since a December bottom. On Friday, the day Uber Technologies Inc. went public and promptly sold off, it closed at its highest level since August 2016. Uber rose 4.5% on Tuesday, the company’s third trading day and the first session it was positive. Lyft gained 4.3%, one day after closing at a record low on Monday. The declines in Lyft and Uber were seen as reflecting growing skepticism about ride-sharing services, which have seen fast growth but also steep losses. The two have also faced controversy over how they treat their drivers, prompting thousands to go on strike. “The underlying investor concern seems to be that they want Uber and Lyft to become profitable,” said Scott Buck, an analyst at B. Riley FBR who has a buy rating on Medallion. “In order to do that, they may have to raise prices, which would make taxicab pricing much more competitive. And to the extent the pricing dynamic becomes better for taxi drivers, the better they can support their medallion loans.” According to the company, medallion loans only represented 14% of its net managed portfolio, down from 56% at the end of 2013. “Despite that, the market perception of the company is still very much tied to the taxicab industry,” Buck said in a phone interview. “To that extent, the negative reaction that we’ve seen to ride-sharing companies is probably good for the taxi industry, although Medallion has a number of other positives.” In Medallion’s first-quarter results, released on May 6, the company posted net income that was higher than expected. “We could potentially benefit” if Uber and Lyft raise prices, spurring a rebound in the medallion industry, but “even if that doesn’t happen…our consumer and commercial business have been very profitable,” wrote Andrew Murstein, president and founder of Medallion, in emailed comments. “We feel we have a very bright future.” He added that Uber and Lyft have a “questionable business model” and, while ride-sharing can sometimes be a good service, “it’s probably being done at below cost.” “I honestly thought they would have more time to convince investors to be patient,” he wrote. Andrew and his father Alvin Murstein, the chairman and CEO, controlled 7.57% and 6.62%, respectively, of Medallion’s outstanding shares as of late March, according to data compiled by Bloomberg, making them the two largest shareholders.


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