Investor Vigilance: Uber And New York City Taxi Medallions!

In New York City the competition from yellow cab alternatives like Uber has eroded the value of taxi medallions!

And, as with most ‘revolutionary’ ideas, the sudden change in the way the taxi industry does business has led to unintended consequences, this time in the investment arena.

Using a loose analogy to the hand-held phone industry, Blackberry (Research in Motion) was slow to recognize and adapt to changes in technology and consumer preferences and subsequently was left behind by Android phone manufacturers like Apple and Samsung. This badly hurt investors who stayed with the stock who were hoping for a turnaround.

Similarly, businesses that rely on a stable or increasing value of taxi medallions have been severely impacted by the advent of Uber and Uber-like companies.

These taxi alternatives that seemingly arrived in the marketplace overnight are giving New York City residents and visitors a new and potentially more reliable, albeit more expensive, mode of getting from one place to another.

And while these companies are experiencing their fair share of growing pains and controversy it would seem that at least in some form they are here to stay.

Unintended consequences for investors in taxi medallions

A low-tech example of what can happen if an investor is slow to recognize either new competition or new technologies that may impact an investment is the taxi medallion financing firm Medallion Financial Corp. that trades with the symbol TAXI.

One of the firms businesses is lending money to buyers of taxi medallions with the medallion serving as collateral.

As medallion prices steadily rose, investors in the stock earned an excellent dividend yield while enjoying price appreciation in TAXI’s share price as well.

But, as the nature of the competition has changed, so to has the risk to the value of the underlying portfolio of medallions and therefore the stock price has plummeted reflecting that fact.

The bottom-line for investors, whatever the investment may be, is that the need to pay attention to existing and/or potential red flags on the horizon is critical so that if the need arises they can attempt to be the first one out the door, not the last.

This is important because, as anyone who lives in or who has visited New York City knows, trying to get through the door when there is a motivated crowd trying along with you can be an extremely difficult thing to do!

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Michael Haltman, President of Hallmark Abstract Service, New York.

HAS is a provider of title insurance in New York State for residential and commercial real estate transactions specializing in the areas of New York City, Long Island and Westchester.

For anyone either buying a property or refinancing, remember that although your attorney will likely recommend a title insurance provider, you always have the right to choose your own title company (click here to learn more)!

If you have any questions you can reach Michael by email at mhaltman@hallmarkabstractllc.com.