Photo: Don Emmert (Getty Images)
It’s no secret right now that Uber and Lyft’s Coming to the ride-hailing scene in the early 2010s dealt a huge blow to the traditional taxi industry, but cost archived Shown this week by the Securities and Exchange Commission (SEC) just how far a company, Medallion Financial of New York, was willing to go to stay relevant.
In its filing, the SEC accused the company and CEO Andrew Murstein of partnering with a California media strategy firm called Ichabod’s Cranium to place fabricated positive stories in major publications using false identifications in a desperate attempt to boost the company’s stock price. Those stories would have made their way to prominent sites such as The Huffington Post, SeekingAlpha and TheStreet.com.
“Murstein allegedly paid for more than 50 articles and hundreds of positive comments, which were in fact paid advertisements placed on the Internet in an attempt to mislead investors about the value of Medallion’s stock,” said Richard Best, president of the company. regional office in New York, in a statement. a statement.
In addition to paying for articles, the SEC accused Medallion of pressuring investment banks to inflate Medallion Financial’s value. “Companies also can’t shop for higher valuations if there’s no evidence to back them up,” Best added. Medallion’s stock rose a 56% dive in premarket trading after the cost news.
Both Murstein and Medallion are charged with violating the anti-fraud, books and records, internal controls and anti-touting provisions of the federal securities laws, while Murstein is also charged with making false statements to Medallion’s accountant.
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Of course, Medallion doesn’t see it that way. In a rack Medallion, which was provided to Al Jazeera, denied that any of the SEC’s allegations amounted to securities fraud, saying it intended to “defend vigorously against the SEC’s baseless allegations.”
As a quick refresher, New York City taxicab medallions are generally a piece of metal proving that a vehicle is legally capable of operating as a taxicab in the city. Those medallions are regulated by the city government and are set at a certain amount (about 13,000 according to Investopedia) to avoid an oversupply of booths. However, those medallions that are already in circulation can be bought and sold in the private market. But that market price is often out of reach for almost any working-class person trying to drive a cab, and that’s where lenders like Medallion Financial come in, offering loans to drivers, sometimes with unmanageable costs and interest.
That process held up for a while, but like a 2019 New York Times research In detail, leaders in the taxi industry began artificially inflating medallion values for years beginning in the early 2000s, pushing prices above $1 million in 2013.) To make matters worse, the arrival of Uber and Lyft in New York, the value of NYC taxi cab medallions (held as collateral for loans) quickly plummeted, causing Medalion’s stock value to tumble.
Before anyone sheds a tear over Medallion, though, it’s worth bearing in mind that the numerous, sometimes, awful detailed reports of taxi drivers in New York drowning in debt as a result of these loans and the sudden shock the ride-hailing business model had on the industry. Those and other factors collided and led to a wave of suicides among drivers, some from protest, the most of despair.
The SEC’s indictment comes at a bad time for Medalion, who has tried to distance himself from the taxi industry. According to Bloomberg, Medallion said in its 2020 annual report that it plans to focus more on consumer lending. Before that, Medallion had: Reportedly started lending to RV buyers and had even gone ahead with the purchase of a professional lacrosse team.
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