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Medallion Financial - Takeover Or Massive Buyback, Equates Opportunity

Dec. 18, 2017 1:11 PM ETMedallion Financial Corp. (MFIN)15 Comments


  • Medallion's industrial bank's earnings power makes for an attractive buy-out at 2.5 to 3 times today's current price.
  • Medallion's taxi medallion portfolio risk has given us an attractive value proposition. Thank you short sellers (5.4 million shares short or over 26 percent of the float).
  • Management buyout or third-party takeover makes sense; but massive buyback more likely after deal with lenders.
  • PE Funds are circling and buying medallions - after they see certain Taxi and Limousine Commission actions and driver trends - creating a base price environment.
  • Medallion $10.00 target - we show you how.

Due Diligence

Our analysis of Medallion Financial's (MFIN) performance and the potential actions MFIN can take to improve shareholder value, both as a business and the underlying stock, are based upon publicly available information on MFIN and the industries in which it operates. Our due diligence, beyond reading years of public filings of MFIN, included but was not limited to the following:

We had dozens of discussions with industry professionals in the consumer lending business, medallion lending, and operating businesses as well as owners of New York City medallions.

We conducted several site visits of yellow cab operators to see how busy they were, and to interview owners and cab drivers etc. We met with, and had multiple question and answer sessions in person, telephonically and via email, with the current MFIN management, and their competitors.

We studied industry reports and trends written by medallion industry professionals. We spoke with the former TLC Commissioner, and have had correspondence with the Mayor's office, and the Taxi and Limousine Commission of New York City regarding the taxi industry, handicap accessibility, and ride sharing companies.

All of our due diligence supported a common theme. MFIN is undervalued... by a lot! Please see our sum of the part valuation and continue reading below to see how and why MFIN will get there in 3-12 months.


Our Long Thesis vs the Short Thesis

Medallion Exposure

"On a Crash Course with Creditors" (see below how this "fear" can and will be eliminated and may lead to a mad rush to buy the stock)

The ability to satisfy short-term debt, especially for a company that has exposure to taxi medallion portfolio risk is a concern, and one that is easily exploitable by fear mongering short reports. However, believe that this risk is overblown, misrepresented and/or misunderstood. Approximately $130 million of MFIN's debt is

This article was written by

Kenneth Orr CEO, CIO and CRO – Series 65 Kenneth “Kenny” Orr is a graduate of Tufts University (’88 - Bachelor of Science) and completed case studies by Harvard Business School Executive Education Program - Concentration in Valuation and Strategic Acquisitions. Kenneth Orr joined a family-owned commodities trading firm called North American Agriculture Inc., and its sister company, Jake’s Products in 1988. Kenny’s roles included sourcing, buying and selling of physical commodities both domestically and internationally. In addition, Kenny led the acquisition of Jackson and Johnson, a leading ICC carrier in the northeastern United States, and sale of significant assets to cooperative Minnesota Corn Processors. During his tenure, which lasted five years, the company’s sales increased by 600 percent and the staff grew to 320 employees. Kenny became a shareholder in both companies. In 1993, Mr. Orr sold his interest in the companies and established his own investment banking firm. Kenny acquired Herold Securities in 1994. Herold was a Connecticut based broker dealer that focused on research. Kenny renamed the firm, First Cambridge Securities, and established offices in New York and Los Angeles, California. As chief executive Officer, Kenny built the firm to over 400 employees and more than 15,000 clients. Clearing through Bear Stearns, FCS quickly became one of Bear Stearns largest correspondents. FCS was an underwriter, syndicate member and or placement agent in billions of dollars’ worth of IPOs, secondary offerings and/or private placements. In addition to brokerage services, FCS maintained a proprietary trading desk, fixed income department and a research department. Co-underwriters and or syndicate members of FCS included Starr Securities, Fagenson & Co., Merrill Lynch, Bear Stearns, Montgomery, and Rausher Pierce. Notable under-writings and or initiated investment focus included, RentWay, which later sold to Rent-A-Center in 2003, and Ivax Corporation, which sold to Teva in 2005, creating the largest generic drug manufacturer in the world. After selling FCS, in 1997, Kenny invested through a venture firm he founded called Triumph. from 1997 through 2015, Triumph invested in micro to small public and private companies that showed promise in the fields of technology, oil and gas, biotech, and health care. Kenny became CEO of KORR Acquisitions Group, Inc. in 2015. KORR is an investment advisory and consulting company. Kenny passed The Uniform Investment Advisor Law Examination, Series 65, in 2015.

Analyst’s Disclosure: I am/we are long MFIN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Our information is limited to being a non-affiliate. Medallion’s financial disclosure is limited in that they do not consolidate their wholly owned subsidiary, Medallion Bank. This reduced disclosure may cause some of our valuations to be off to some degree. Despite the limited disclosure and information as a non-affiliate, we believe our analysis is solid and believe that our conclusions are elementary and undeniable. We are long MFIN, and reserve the right to buy additional shares and or sell our shares without issuing an updated report of notice.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (15)

Great article- still don’t understand how Lyft and Uber can operate as unlicensed Taxis- i.e. no medallion
Gordon Gossage profile picture

... short term trading
pump... really cold here, I wish I was on the beach of U.S. Virgin Islands
In 2001 there were 5,000 Russians living in Cyprus, as of 2011 there were over 100,000.
Rus... mostly live in Larnaca, Limassol and Paphos.
Any of you guys meeting at the Secret Garden the evening the day after MFIN releases the 10-K?
mjk0259 profile picture
The "industrial bank" is mostly high risk loans on RV's and other assets which have very little repossession value, no? It's not like they are lending to Microsoft or the local power company.
Korr Acquisitions Group, Inc profile picture
The bank primarily lends on home improvements, RVs, motorcycles, and trailers. The home improvement loans are high credit borrowers and account for approximately half of the consumer loans. The bank has been through market cycles (been in business for 15 years) and even during the financial crisis they only had their default rates rise to >6%. This is a very well managed business.
Korr Acquisitions Group, Inc profile picture
Strictly publicly available information. We showed the industrial bank (the publicly available information) to industry professionals, and potential acquirers, and feel comfortable with that valuation.
GreatQuarter profile picture
Kenny, kudos on the due diligence you did. I am curious about this statement: "This industrial bank is worth at least the $300 million the company has it listed as, we know, we have shown it to potential acquirers." Typically, to show a company to potential acquirers, one would put together a deal book with studies and non-public information. When you write: "we have shown it to potential acquirers", are you saying you were involved in a formal investment banking process to sell the bank, or are you referring to receiving advice from informed industry participants with respect to valuation based on publicly available information? Thank you!
Uber was a pirate, and now that its gotten big enough for regulators to put it in check its getting its ass handed. JUST NOW Is Uber a Taxi Company or Not? The EU's Top Court Will Decide https://bloom.bg/2D7nJqY

i can't remember where I read it but the efficiencies of a taxi fleet (consolidated insurance, and auto repair) will prove itself valuable as soon as the regulations kick in.

Even with automation coming in, regulating automated taxis is still going to be a priority, and I'm guessing a bigger priority since any large company can flood markets with "autotaxis" and act as a loss leader for a very long time against humans or against other automatic taxi fleet rivals

On a comment for an acquisition. This is a "family" business. Only way its getting acquired is if little Murstein is given his paintings and toys (noncore assets) and a big bag of cash.

Thanks for spending the time for writing your article
new EU regulation says UBER IS A TAXI COMPANY
GreatQuarter profile picture
To date, US courts have consistently ruled in favor of TNCs (Uber, etc.) when challenged by taxi companies. Not clear if this EU ruling will help to modify the discussion in the US. But the EU's ruling could help to make US investors modestly more positive on MFIN from a sentiment standpoint.
petektf profile picture
I should of held onto all my shares when I bought it, half the price of today.
I have followed this company for many years and am glad to see someone taking the initiative to get some value here. When medallions went over a $million I felt that they were overvalued especially because the servicing costs as well as other operating expenses were becoming too burdensome for individual drivers (as well as the syndicates). This was before the advent of Uber and Lyft. Now the situation seems to be changing and the stock below $4 could be interesting.
High quality article. Refreshing. Thanks
Richard Hill profile picture
Great article. I have been watching MFIN for a long time and decided to buy the common today. I think readers should also take note of the baby bond MFINL. It has risen from the dead of around $13.20 TO going over par today at 25.20. luckily I started buying that about a month ago. I can see that going up to around $26 or so.
it's a long drawn out dead cat bounce, visibility should be paramount, I don't see how it could be "elementary and undeniable" in the light that it's a forced change & the narrative is down & to the right, this is a dinosaur
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