Since its beginnings, Medallion Financial has been guided by a catchy core philosophy: “In niches there are riches.”
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The company grew from a single taxicab in New York City to a multimillion financier of cab medallions in New York, Chicago and Boston.
Who knew, decades ago, that taxis could be so valuable? Polish immigrant Leo Murstein knew.
It’s unlikely, though, that even Murstein, who bought his first medallion for $10 in 1937, envisioned what his enterprise would become. Medallion Financial (Nasdaq:TAXI) is now a publicly traded company whose board includes baseball great Hank Aaron, former New York Gov. Mario Cuomo and former Connecticut Gov. and U.S. Sen. Lowell Weicker.
Murstein’s son Alvin and grandson Andrew run the company, and they’re branching out into sectors that could hardly be considered niches. Medallion is a lead investor in public companies looking to acquire sports ventures and security firms.
Sports Properties Acquisition (AMEX:HMR), a Medallion investment chaired by former Buffalo Bills quarterback and U.S. Sen. Jack Kemp, raised $200 million when it went public in January.
Another Medallion venture, National Security Solutions (AMEX:NSX.U), has notified the SEC of its plans for an IPO. The company, which intends to acquire domestic and/or international security firms, is led by Howard Safir, former New York City police and fire commissioner.
Director nominees include Weicker and former homeland security chief Tom Ridge. Advising the company are former FBI director Louis Freeh and former United Nations ambassador Richard Holbrooke.
If portfolios are sociology, there’s a fiddling-while-Rome-burns dimension to the mix of investments.
Sports Properties notes in its annual report:
There has been a continuing increase in attendance at sports and entertainment events, and many cities have expressed interest in having sports teams, including Las Vegas, Houston, Rochester, Orlando, Portland, Los Angeles, Oklahoma City, Kansas City, Hartford, Winnipeg and Seattle. A significant opportunity exists to establish new franchises, or relocate existing franchises.
The security business is also a booming, as pointed out in the prospectus filed by National Security Solutions:
The homeland security industry is among the fastest growing industries in the world, with a global market that is expected to grow from approximately $55 billion in 2006 to more than $170 billion by 2015 … Over the past few years, consumers, corporations and governments in the United States and abroad have faced a wide range of threats for which security and homeland defense solutions are constantly being sought, including threats to life and safety, physical and identity theft, intellectual property compromise, vandalism, counterfeiting, fraud, industrial espionage, threats to critical infrastructure, threats to fossil fuel supplies from foreign sources and terrorism.
The original source of Medallion’s wealth was an ideal moneymaker: Seemingly unlimited demand for a restricted supply. In New York City, there are only 13,150 cabs with city-regulated medallions. The number is controlled by the city Taxi & Limousine Commission, which reported in December that the average medallion cost $426,000 for individual owners and $600,000 for corporate owners.
Medallion’s trade was built on strong relationships with brokers and cab drivers. The latest ventures also rely heavily on the recruitment of people who are known and trusted, but in much bigger power circles. The celebrity of Kemp, Cuomo, Aaron and Weicker opens doors and reassures investors.
The company may be able to find niches in fields already crowded with competitors. (What multimillionaire doesn’t want his own sports franchise?)
How it fares in the coming months may well depend not only on its acquisition targets, but on its network of contacts.