NEW YORK (TheStreet) -- Several developments over the past few weeks suggest the tide could turn against ride-hailing service Uber. This should make investors think twice about investing in a potential initial public offering from this company. It should also make people question whether difficulties for taxi medallion lenders -- including regulators' takeover last week of troubled Montauk Credit Union -- could eventually subside.

As I wrote

recently

, and as Lawrence Meyers wrote in an opinion article in the

New York Observer

, Uber and medallion taxis may have arrived at market equilibrium. If this is true, it speaks to fundamental flaws in Uber's business model. Driving for Uber simply doesn't pay well enough for most people. Uber's entire business model depends on having enough drivers to fill demand. Word appears to have spread that drivers are getting the short end of the stick.

For example, drivers for Uber's higher-priced UberBLACK service protested last Friday outside Uber's Dallas offices. They felt cheated because they had invested in expensive cars to drive for UberBLACK, only to have the company undercut them by introducing the lower-cost UberX service in the city.

Some drivers may be earning decent revenue thanks to Uber's surge pricing, in which the company automatically raises prices when there's a lot of traffic and cars are scarce. But an increasing number of apps have appeared on the market that help riders avoid those charges.

Meanwhile, the company faces regulatory headwinds from local governments. In Austin, Texas, local officials are looking at increased regulations on Uber out of concern for providing a level playing fields for all transportation companies.

Elsewhere, Massachusetts lawmakers are considering regulating ride-hailing companies such as Uber and Lyft. A bill from Gov. Charlie Baker would add at least five new employees to the Department of Public Utilities. They would make sure that ride-hailing companies had done appropriate checks on their drivers and insured them. The companies would have to cover the cost of this regulation, according to a report in the Boston Globe.

And last week, Boston's police commissioner said that Uber officials lied to him about when he asked them about inspections on their drivers' vehicles, the Boston Globe also reported. An Uber representative said the commissioner's statement was a misrepresentation of conversations between the company and the police department, the report said.

We may also begin to see more local governments look into Uber's background checks of its drivers and step up regulation in this area. There have been some alarming news reports this year that suggest Uber is not properly screening its drivers.

A Los Angeles Times article in August said four Uber drivers who got tickets at Los Angeles International Airport were found to have criminal records that would prevent them from operating traditional taxis. Their convictions included child exploitation, identity theft, manslaughter and driving under the influence, the Los Angeles Times reported, citing court records.

Earlier, in April, the Houston Chronicle reported that the city of Houston's own background checks found "numerous crimes by prospective Uber drivers, ranging from aggravated robbery to driving on a suspended license."

There also could be regulatory scrutiny of Uber on the issue of how it represents the location of available cars to riders. Reports this summer revealed that Uber's app showed that cars were available close to riders when they weren't.

Why do all of these things matter? Uber has had a free ride, plowing through state and local regulations as if they didn't exist. Consumers appear to have been tolerant because the taxi medallion sector needed to innovate, and because Uber does solve problems of demand and even reduces drunk driving.

Consumers may be realizing that this is a potential deal with the devil, however. All of the problems we are witnessing are exactly the reasons that New York passed the Haas Act in the 1930s! Uber is arguably nothing more than a gypsy cab.



Without sufficient regulation, we are already seeing Uber try to grab market share by reducing prices, creating a race to the bottom that makes it harder and harder for drivers to make money, and allowing more than a handful of bad apples become drivers. This is permitted because Uber sloughs off liability for any crazy thing one of its "partners" might do to a passenger.

This means that if you are considering investing in any possible Uber IPO, you should proceed with extreme caution. The same goes for Airbnb. These are not market disrupters. They are operations that just bully their way into regulated markets, and it is foolish to believe that regulation isn't going to catch up with them.

As for the taxi medallion lenders, if the tide has indeed turned against Uber as I believe it has, there may be value in the sector. Certainly, some of the weak lenders are going to face difficulties as they try and work out their portfolios, and Montauk Credit Union is an obvious casualty. However, some of the legacy conservative lenders with decades of experience are not in nearly as much trouble. That may be a place to look for oversold stocks that have high short interest, indicating that lots of people have sold short the stock. A couple of names worth investigating are Signature Bank (SBNY) - Get Report and Medallion Financial (TAXI) .

This article is commentary by an independent contributor. At the time of publication, the author was long shares of TAXI.