It’s pretty amazing to me that a writer for the Motley Fool, Jordan Wathen, keeps trying to convince himself and the investment community that he REALLY knows a lot about the taxi medallion financial industry.
He keeps publishing inane articles that have no basis in fact, logic, or proper accounting and tries to pass them off as being REALLY smart and insightful.
Of course, Jordan Wathen is short one of the stocks in the taxi medallion financial industry and he is now underwater on that short. So leave it to him to pull out anything he can and throw it against the wall.
I won’t bother to link you back to his article. But I am posting WHY he is wrong. Pay attention, Jordan Wathen, I’m trying to save what little credibility you have left.
Kid, the company purchased 159 Chicago medallions out of foreclosure in 2003 and 2006 for $8.689 million, or about $55,000 each. Since that time, they have not only been earning lease fees equal to about 7% cash on cash return EACH YEAR, but have used loans collateralized by those same medallions to lend for other purposes, earning even more money from them. That’s about ten years of returns from those medallions alone. The revenue earned is probably well past what was paid in total.
But you embarrass yourself even further!
First, you mistakenly claim that the LTV of $25M were fully collateralized by the medallions, then valued at $50 million.
They were only collateralized by $10M worth of the medallions and it is right there in the 10-K, dummy. The rest is guaranteed by the company and the footnote makes that clear.
You even get the loan term wrong. You claim the loan is for 25 years. It is not. It is a term loan for 4 years at 3.12%.
Now for THE BIG LIE.
You claim, “The lease income Medallion Financial earns on its Chicago medallions does not cover its debt service, and hasn’t for the entirety of 2015. ”
Really? Says who, Jordan? You? Based on what evidence? NONE. You have the lease schedule for these medallions, do you?
No, you do not.
You just made it up.
Even if each leased medallion only earns $150 per week, or $7,500 per year, which is a mere 30% of the contract lease rate, those 159 medallions still generate $1.2 million per year — which is what the company pays in principal and interest on the term loan.
But that’s not all, dumbass. The company lends out that $25M at a weighted average of 7.73%, vastly in excess of the 3.12% interest it iOS paying on that loan.
So please, go away. Go far away where you won’t keep making yourself look like the fool you are.