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Gun Industry Executives: Mass Shootings Good for Business and Stock Prices

Gun Industry Executives: Mass Shootings Good for Business and Stock Prices
In this 2012 file photo, a Smith & Wesson .357 magnum revolver is displayed for customers at the Los Angeles Gun Club in Los Angeles, California. (Kevork Djansezian/Getty Images)

By    |   Thursday, 03 December 2015 02:56 PM EST

Industry insiders are said to claim that gun companies view mass shootings as an opportunity to make lots of money as sales continue to break records.

The U.S. gun business is extraordinarily lucrative, reportedly generating around $8 billion in annual new small arms sales, among other staggering financial statistics we'll soon cover.

And investors are betting the latest high-profile mass murder will boost holiday gun sales, The International Business Times reported.

CNBC, citing numerous worldwide sources, detailed the financial numbers of the gun industry:
  • The gun and ammunition manufacturing industry garners annual revenue of $13.5 billion, with a $1.5 billion profit.
  • Gun and ammunition stores post annual revenue of $3.1 billion, with a $478.4 million profit.
  • The estimated number of guns in the U.S. is 270-310 million.
  • The number of full-time jobs related to the firearm industry is 263,223, up from 209,750 in 2012.
  • The estimated overall economic impact of the firearms and ammo industry in the U.S. is $42.9 billion.
The financial "ripple effects" of Wednesday's shooting have been felt on Wall Street as well.

Stock in Connecticut-based Sturm, Ruger & Co. Inc. (RGR) jumped more than 1.5 percent Thursday to $53.43. Meanwhile, shares Smith & Wesson Holding Corp. (SWHC), the Massachusetts-based maker of Sigma semi-automatic pistols, jumped nearly 3 percent to $18.85.

“U.S. mass shootings tend to boost gun sales as gun-happy consumers rush to stock up on arms and ammo amid concerns the federal government will respond to these massacres by tightening gun controls,” The International Business Times reported.

“While it’s difficult to make a direct link between the long term movement of gun manufacturers’ share prices and high-profile multiple homicide shootings, it was clear by the stock price movements Wednesday afternoon some investors bought shares in response to the shooting, hoping to earn a future profit for themselves on gun sales,” The International Business Times reported.

Meanwhile, Lee Fang of The Intercept reported that he “reviewed investor transcripts for gun companies, ammunition manufacturers, and sporting stores, and found many instances of industry executives discussing mass shooting incidents and the resulting political dynamics as lucrative.”

“Following a mass shooting, there is talk of gun control, which the National Rifle Association and other gun advocates attack as an assault on the Second Amendment. Notably, gun and ammunition manufacturers often donate, either directly or as a portion of each sale, to the NRA. The fear of losing gun rights leads to panic buying, which brings greater profits to gun retailers, gun companies and their investors,” Fang reported.

“The gun business was very much accelerated based on what happened after the election and then the tragedy that happened at Sandy Hook,” Ed Stack, the chief executive of Dick’s Sporting Goods, a leading gun and ammunition retailer, said in September 2014 at the Goldman Sachs Global Retailing Conference, Fang reported.

Stack noted that the industry saw “panic buying” when customers “thought there were going to be some very meaningful changes in our gun” laws. The new sales “didn’t bring hunters in” but rather “brought shooters into the industry,” Fang cited Stack as saying.

Fang cited a lengthy list of gun and ammunition manufacturers, gun distributors and Wall Street analysts to support his conclusion: mass shootings eventually result in higher profits.

And with more than 300 million firearms owned by U.S. civilians and at least 100 million guns produced by U.S. manufacturers in the last 25 years, the U.S. has the highest rate of gun ownership in the world, Al Jazeera America reported.

“Though Glock handguns originate in Austria, Beretta is an Italian creation, and Uzi submachine guns come from Israel, the bulk of firearms in the U.S. come from domestic factories. And almost half of the guns made in America are produced by three companies: Sturm, Ruger, Smith & Wesson, and Freedom Group. Combined, they sold about 40 million firearms over a quarter-century, Aljazeera reported.

“A substantial percentage of the resources for the biggest lobbying groups — including the NRA, Safari Club International, Gun Owners of America and the National Association for Gun Rights — comes from gun manufacturers. The NRA, for example, receives some $10 million a year from gun companies, according to a 2013 report by the Violence Policy Center, a Washington D.C.-based nonprofit,” it reported. 

“Despite the public outrage over gun violence since the 2012 shootings in Sandy Hook, gun companies’ business has boomed this year. Investors generally expect sales jumps when politicians call for tougher gun laws,” it reported.

Spotlighting three top U.S. gun makers:

Sturm, Ruger & Co.

Ruger achieved record sales of $588 million in 2013. Sales dropped in 2014 on declining demand and competitive pricing but have rebounded in 2015. Ruger has paid quarterly dividends since 2009 and returns on its stock has routinely outpaced Apple Inc. during President Barack Obama’s gun-control-supporting administration.

Smith & Wesson Corp.

Smith & Wesson sales have also flourished in recent years out of concern by many gunowners that Obama would reel in their ability to stock up their cabinets. The company’s sales reached a record high of $626 million in 2014, a 50 percent increase over 2010. In 2015, first-quarter profits rose significantly to $17.7 million, partially boosted by an increase in accessory sales. Smith & Wesson’s stock price has doubled from around $9 to about $18 per share since January. The company’s lobbying spending peaked at $360,000 in 2011; it decreased to $70,000 last year.

“We experienced strong consumer demand for our firearm products following a new administration taking office in Washington, D.C., in 2009,” the company said in its most recent annual report. 

“In addition, speculation surrounding increased gun control at the federal, state and local level[s] and heightened fears of terrorism and crime can affect consumer demand for our products. Often, such concerns result in an increase in near-term consumer demand and subsequent softening of demand when such concerns subside."

Freedom Group

Freedom is the parent company of Bushmaster, maker of the rifle used by Adam Lanza in the 2012 Newtown massacre. Freedom is a privately-held conglomerate.  Cerberus Capital Management, the New York-based private equity firm that owns Freedom Group, has faced public pressure to unload its stake in the company, Aljazeera reported.

Freedom also owns Remington Outdoor Co., which bills itself as “America's oldest factory that still makes its original product: guns,” Aljazeera reported.

“Remington’s profits surged 52 percent in the first year after Newtown, as consumers rushed to buy guns, fearing stricter laws. But since then, the company has struggled. Known for shotguns and rifles, Remington has reeled from a major 2014 recall, with the company promising to replace millions of triggers on reports of false firings. Last year, revenue dropped 20 percent to $1 billion, as analysts say rifle demand is less robust than demand for handguns,” Al Jazeera reported.

To be sure, some prices of gun-related stocks jumped as new broke of Wednesday’s incident.

CNBC's Carl Quintanilla tweeted out that Smith & Wesson's stock jumped roughly 1 percent in the minutes after word of the shooting got out, at around 2 p.m. Eastern, The Washington Post reported.

Meanwhile, shares of Ruger also jumped 1 percent and continued rising through the end of the day. Ruger stock continued to climb Thursday, as did Smith & Wesson shares.

However, as the Post noted, "there are only a handful of publicly traded gun companies — one of the few others, Olin Corporation, of Clayton, Missouri, ended the day down 1.4 percent." Olin shares were higher Thursday.

The business rhetoric around mass shootings “doesn’t surprise me at all,” Ladd Everitt, the director of communications of the Coalition to Stop Gun Violence, told the Intercept's Fang. Everitt noted that the National Rifle Association, which is funded by gun manufacturers, often uses similar language following mass shootings, Fang reported.

“This just shows the guys in the suits understand this and are utterly cynical about it.”

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The U.S. gun business is extraordinarily lucrative, reportedly generating around $8 billion in annual new small arms sales. Industry insiders reportedly claim that gun companies view mass shootings as an opportunity to make lots of money as sales continue to break...
gun, stocks, shooting, profits
Thursday, 03 December 2015 02:56 PM
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