Medallion Financial stock price plunges 59% after SEC pump allegations
- A New York-based taxi medallion company plunged as much as 59% after the SEC alleged the company engaged in promoting illegal actions.
- According to the SEC, Medallion Financial paid a media company to publish positive investment stories about the company from 2014 to 2017.
- Shares of Medallion Financial have been hammered over the years due to ride-sharing disruptions by Uber and Lyft.
Shares of Medallion Financial, a New York-based taxi medallion loan company, plunged as much as 59% after the SEC alleged that the company and its chairman and chief operating officer, Andrew Murstein, were indulging illegal stock promotion activities.
According to the SEC complaint, Medallion hired a media strategy firm to publish more than 50 positive articles and hundreds of positive reviews about the company on various websites, including investment platforms SeekingAlpha and TheStreet.com.
From late 2014 to 2017, Medallion reportedly engaged with California-based media company Ichabod’s Cranium to create fake identities so their op-eds would appear believable to potential investors.
“Murstein allegedly paid for more than 50 articles and hundreds of positive comments, which were actually paid advertisements placed on the web in an attempt to mislead investors about the value of Medallion’s stock,” said office manager Richard Best. SEC regional office in New York.
Taxi medallions are permits that allow taxi drivers to operate in cities. They are transferable and their limited supply once made them attractive investments. But the arrival of disruptive ride-sharing companies like Uber and Lyft has changed that.
Medallion sought to reverse a precipitous drop in its stock price, which has fallen 43% since 2014 while the S&P 500 is up more than 160%.
Separately, the SEC alleged that the company fraudulently increased the book value of its wholly-owned subsidiary, Medallion Bank, to help offset losses from its taxi medallion loans. After Medallion’s valuation company refused to increase its valuation of the company following pressure from Murstein, the company hired a new company to provide an increased valuation of the bank.
In total, the SEC accuses Medallion and Murstein of violating the anti-fraud, books and records, anti-soliciting and internal controls provisions of the federal securities laws. Murstein is further charged with making false statements to the Medallion auditor. Finally, Ichabod’s Cranium and its owner, Lawrence Meyers, are accused of solicitation and fraud.
The SEC is seeking civil penalties, permanent injunctions and restitution of ill-gotten gains plus prejudgment interest. Additionally, the agency is seeking to bar Murstein from executive and leadership positions.
In a statement to Insider, Medallion disputed the SEC’s accusations and blamed short sellers for its stock price decline more than five years ago.
“We intend to vigorously defend ourselves against the SEC’s baseless accusations and are confident that we will be fully vindicated…The actions in question occurred five or more years ago at a time when sellers at discovered were engaged in an online campaign to drive down the company’s stock price for personal gain by spreading misleading and derogatory information and misrepresenting its business. Medallion sought only to provide the market with an accurate understanding of the financial situation. and outlook for the Company and an appropriate and transparent valuation of Medallion Bank and its other assets,” the statement read said.
Medallion shares pared losses to around 25% in afternoon trading.