Hedge Funds Betting Big on Distressed New York Taxi Business

October 18, 2018 James Heinsman In the News

Hedge funds specializing in buying into distressed sectors in the hope of seeing a turn around in that sector’s popularity, have been buying what used to be coveted taxi medallions. The value of medallions, the metal shield that taxi owners attach to the hood of their cabs are the license that legally allows cabs to pick up passengers off the street. The medallions reached a record price of $1.3 million a piece in 2013, on the cusp of the introduction of app-based ride-sharing services like Uber and Lyft. As the popularity of these apps grew, the value of the medallions plummeted. Today they can be purchased for under $200,000 each.

Marblegate Asset Management LLC, a hedge fund based in Greenwich, Connecticut, has been buying medallions over the past year, scooping up about 300 for a total price of more than $50 million. Marblegate, and other similar firms also buying medallions, are betting that the prices have fallen too far, and are bound to bounce back to some extent.

Over the past three years the total number of vehicles used for ride-hailing in New York has more than tripled. Yellow cabs with medallions, numbering about 13,500, and whose numbers have hardly changed in 80 years, make up a small percentage of the 80,000 cars used for ride hailing services.

The fierce competition has seriously disrupted the yellow cab industry. Despite the total number of passenger trips in for-hire vehicles having skyrocketed, the number of rides in yellow cabs has shriveled up, drying up revenue to this now beleaguered sector.

Investors believe New York will always need traditional cabs, which have the exclusive right to pick up street hails in Manhattan. According to regulators, at least one million people take a ride in a town car, Uber or taxi every weekday across the city.

“As long as there’s a hail system and a central business district, there will always be business for them,” said Matthew Daus, a lawyer at Windels Marx Lane & Mittendorf LLP who specializes in the medallion industry.

Lyft, Marblegate Asset Management LLC, Matthew Daus, medallion, taxi,

Comments are currently closed.

Powered by WordPress. Designed by elogi.