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Medallion Financial: Price Rising

Medallion Financial’s stock price-after reaching an all-time low on February 9, 2017 has been careening upwards. We noted the phenomenon in an article on February 17th. In the early hours of Tuesday February 21, MFIN is up again-the biggest moved on the day so far and valued a third higher than at that low point.

The BDC Reporter suggests why and what could happen next.

MFIN Stock Rising. Our view on who should buy and who stay away.

EARNINGS RELEASE

By the way, thank-you to one of our Twitter Followers (hate that term-makes anyone who reads you or who you read sound like part of a cult) Francis.

He pointed out what we should have remembered: that MFIN is issuing its earnings on Wednesday.

(In our defense-unlike many BDCs-MFIN is very shy about alerting visitors to its website about key dates like the earnings release).

To Francis that’s causing “a major short squeeze”.

The BDC Reporter does not get into that type of market information so we can’t say, and we’ll take Francis at his word.

ROCK AND ROLL IS HERE TO STAY

However, it is true that earnings are coming and this has become a very speculative stock.

We had a look at the 6 month chart and identified five up and down cycles of investor enthusiasm and pessimism in that period.

DEJA VIEW

Currently investors are pushing the Like button.

However, we can’t help remembering that there was a similar burst of enthusiasm after the last earnings press release.

We went on the record advising would-be investors to wait for the release of the 10-Q.

When the 10-Q was filed a few days later and the sober reality of MFIN’s business predicament was spelled out over hundreds of pages, the stock tanked.

We wrote a long analysis after dissecting the document which highlighted some of MFIN’s troubles.

DIFFERENT ?

This time the news from the BDC may be good for all we know.

However, we would just warn anybody considering throwing their hat in the ring (or whose chapeau is already there) that this is the very definition of a “speculative stock”.

THE NEVER ENDING STORY

Moreover, it is highly unlikely-whether the balance of the information in the coming filing (we wouldn’t trust the press release alone from a company with its back against the wall) is on balance positive or negative-that there will be any resolutions.

We’ve read the prior filings and MFIN has many, many different challenges with a host of lenders, regulators, borrowers and plaintiffs.

Of course some are small potatoes, but the outcome of many of these issues could have a “huuuge” effect (to quote our President referring to more important issues) on the future of MFIN and whether it survives in its current form.

Most of that is unlikely to reach a clear conclusion on Wednesday.


VIEWS YOU CAN USE

  • MFIN will be reporting earnings in a press release on Wednesday. The 10-Q filing will probably be out a few days later.
  • The BDC Reporter’s view is that only investors who are in a speculative mood should be joining the current upward trajectory of the stock.
  • When all the reporting is done, MFIN could just as easily lose all its gains (or worse) as continue to climb.
  • February 9th may have been a turning point, but could just as easily be just another data point given that MFIN has so many unresolved items in its docket.