Who Is Buying All the Gun Company Stock?

By Douglas A. McIntyre Published Dec 18, 6:32AM EST

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Investors abandoned shares of Smith & Wesson Holding Corp. (NASDAQ: SWHC) and Sturm, Ruger & Co. (NYSE: RGR) after the Newtown shootings. Private equity firm Cerberus Capital Management plans to sell its Remington Outdoor Company operation, which is a holding company for its gun firm ownership. For every sale of shares of a corporation, there is a buyer on the other side. Someone, or some entity, believes that profit is more important than the chance of gun control, as well as the likely effects that control may have on massacres like the one in Newtown.

Smith & Wesson’s shares have dropped nearly 15% since the shooting, perhaps on the belief that gun control will undermine its earnings. The volume of shares traded was well above its 90-day average. But the shares at $44 apparently were irresistible, for a stock that traded at nearly $60 less than a month ago. Remington Outdoor Company likely will be sold at a discount to what Cerberus believed it was worth just a day before the shooting. But the PE firm clearly thinks that holding the company would be either bad PR or an ethical problem.

Capitalism and the free markets will always operate largely on buyers who believe that stocks being sold cheaply enough to earnings represent profits based on future prospects. The buyers of gun company stocks may believe that the effects of Newtown will blow over. Or perhaps efforts by national politicians to set new rules for ownership will fail because of aggressive lobbying by the NRA or the provisions in the Constitution that allow people to own and carry arms and use those arms to defend themselves. Of course, many of these guns are used to kill, but “people kill people, guns don’t,” according to ownership advocates. It is better to set stricter rules for the mentally unstable to have access to weapons.

No matter what the reason, the gun trade on Wall St. has attracted many buyers. Sales of guns, these investors believe, will continue to be a booming business, no matter what happened in Newtown.

Douglas A. McIntyre

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.