Zimcal sends letter to stockholders outlining how Medallion's true valuation potential will be difficult to reach without change
$MFIN
ZimCal Asset Management LLC
BIMIZCI Fund LLC & Warnke Investments LLC
4737 County Road 101, #264
Minnetonka MN 55345
www.restoretheshine.com
May 28th, 2024
Dear Fellow Stockholders of Medallion Financial Corp.,
We are at a critical point and you have to make a very important decision.
Medallion is trying to manipulate and distract you by claiming ZimCal is not looking out for your interests. This is a liei. Medallion is simply trying to gain an unfair advantage in this proxy contest rather than address the issues we have raised.
We believe that Medallion Financial Corp. has tremendous potential and that all our investments could be worth much, much more except the Board and management have lost credibility. We must have change for things to improve.
We have invested in over 100 BANKS. We have worked in consumer lending. We know what it takes to succeed.
Medallion said that our $7.72 million in cash invested and our 90,010 shares is “miniscule.” Therefore our opinion does not matter. We believe that EVERY shareholder’s opinion matters, whether you have 500 shares or 500,000.
THE SEC ALLEGATIONS AGAINST MEDALLION FINANCIAL CORP ARE VERY SERIOUS AND WE BELIEVE THAT THE INVESTIGATION IS FRIGHTENING AWAY INVESTORS
The charges are so serious that the SEC is seeking some of the harshest penaltiesii against Mr. Murstein and Medallion.
Mr. Murstein and Medallion Financial know that if elected to the Board, ZimCal would demand a 3rd party investigation of Mr. Murstein’s behavior that led to SEC charges for fraud, lying to Medallion’s auditor, and touting.
If Mr. Murstein did nothing wrong, why he would resist an independent investigation to clear his name?
We believe that Mr. Murstein has been protected by his father (CEO and Chairman of the Board), his father-in-law David Rudnick (a Board member), and Brent Hatch (the Lead “Independent” Director) a 21 year Medallion insider.
We don’t expect saints to lead Medallion, but we expect leaders who represent stockholders and accept responsibility
EVERY DOLLAR PAID TO EXCESSIVE COMPENSATION IS A DOLLAR TAKEN AWAY FROM STOCKHOLDERS
Mr. Murstein is frightened by the support you have given our candidates and knows that if we are elected, his very comfortable perks and excessive compensation might be severely impacted.
If any executive officer is found to have engaged in “detrimental conduct” the Board can clawback cash and equity compensation per Medallion’s Compensation Recoupment Policy. This could apply to Mr. Murstein.
Mr. Murstein was paid $6.5 million in 2023, as we have shown extensively, this is an amount much higher than comparable institutions with better performance than Medallion. Stockholders have also paid for his country club membership, his car, his garage, his car driver and social club membershipsiii .
Over the last 6 years (since Medallion converted from a BDC), Mr. Murstein has been paid $25 million and yet stockholders have only earned $76 million. Medallion has only made a profit 3 of those 6 years and we believe that Mr. Murstein ignored CLEAR warning signs that could have prevented or reduced the losses from 2018 to 2020.
MEDALLION HAS TOLD HALF-TRUTHS AND LIES ABOUT ZIMCAL
Medallion has tried to scare stockholders by making false and defamatory statements about ZimCalv . We have published unedited emails to and from Mr. Murstein at https://www.restoretheshine.com/materials/zimcal-mfin-emails that CLEARLY show we have ALWAYS been focused on building a better Medallion. Please read them.
As a result, we have a hard time believing that Medallion is interested in the truth and would prefer to try to scare stockholders. We have backed up every statement we have made with data and sources and always provided context.
We believe that the personal attacks and an inability to intelligently and honestly answer the questions and issues we have raised, the same ones we raised 7 months ago, reflect poorly on management and Medallion.
Our 2 candidates only represent 25% of the Board so we cannot do anything by ourselves. Our debt investment also does not give us any additional rights to do anything unless Medallion decides not pay back its debt.
MEDALLION IS DISGUISING ITS DECLINING PERFORMANCE AND IS NOT PREPARED FOR MORE CONSUMER STRESS
Bad consumer loans have increased MASSIVELY over the last 2 years and quarterly charge-offs are at their HIGHEST levels since 2012vi. We are coming off a period of huge government stimulus and ultra-low rates so this may get worse. We expect some seasonality for 2Q24 and 3Q24 to help this slightly, but the overall trend is downward.
We believe that stockholders could be harmed if Medallion faces a tougher economy and delinquent borrowers. Medallion could repeat the terrible mistakes it made with the taxi medallion portfolio.
“Record earnings” in the last 3 years have been inflated by non-recurring incomeviii. This is mostly why earnings DECLINED BY 37% at 03/31/24 compared to a year ago and 30% COMPARED TO 12/31/23.
Important performance indicators like coreix ROA and ROE have gotten much worse and management has not answered the concerns we raised 7 months ago about this and its large amount of SUB-PRIME loans.
Medallion’s stock price is down 20% YTD, down 15% in 2 years, up only 15% in 5 years and down 40% over 10 years (through 1Q24). We do not believe the stock price will go up and stay up UNLESS there is a change in the Board and leadership. Think what the stock could be worth with more liquidity and institutional support?
ZimCal has been an investor in the Company for over 3 years. We have invested $7.72 million in Medallion and own 90,010 shares of common stock and $15 million in debt, making us one of the single largest investors in the Company. We invested when very few wanted to. We need management to proactively address the risks we have identified NOW.
OUR INTERESTS ARE SQUARELY ALIGNED WITH ALL MFIN’s stockholders – simply put, we want Medallion Financial Corp. to thrive in the long term.
Medallion stock goes up ZimCal makes money
Medallion makes more profit ZimCal makes money
Medallion stock goes down ZimCal loses money
Medallion makes less profit ZimCal loses money
VOTE FOR OUR 2 HIGHLY QUALIFIED CANDIDATES WHO ARE COMMITTED TO STOCKHOLDERS
Messrs. Hodges and Deppisch combined:
Have invested in over 100 bank lenders.
Have been in leadership roles in current and prior organizations.
Are independent thinkers and believe in holding management accountable and putting stockholders first
Have a combined 40 years of financial experience in areas that directly overlap with the Company’s core business
Looking to replace two individuals with long ties to MFIN, including the father-in-law of Andrew Murstein who has been on the Board for 28 years. Please visit and sign-up at www.restoretheshine.com for updates/details.
Enclosed are our proxy materials, including a WHITE proxy card or WHITE voting instruction form where you may vote FOR our two nominees to the Board. If your shares are held with a bank or broker, you may vote your shares over the Internet too. EVEN if you voted for Medallion Financial’s candidates, you can still change your vote by voting a later dated WHITE universal proxy card online or by mail. Only your latest dated vote will be counted We want to earn the support of all investors, whether you have 10 shares or 500,000 shares.
Please go to our website www.restoretheshine.com for more information on our candidates and our strategy. We have a comprehensive FAQ section and biography information on our two excellent Board candidates and voting instructions at www.restoretheshine.com/vote. Please reach out to me directly if you have any questions on the data I have presented at info@restoretheshine.com. Thank you for your time and we appreciate your support.
Sincerely,
/s/ Stephen Hodges
Stephen Hodges
President, ZimCal Asset Management
Manager, BIMIZCI Fund LLC
BIMIZCI as Manager, Warnke Investments, LLC
Source:
https://www.sec.gov/Archives/edgar/data/1000209/000089706924001196/exhibit1.pdf