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Investors turn against gun makers after massacre

 

Patrick Hand, center, joins a march to the National Rifle Association headquarters on Capitol Hill in Washington Monday. Curbing gun violence will be a top priority of President Barack Obama’s second term, aides say, but exactly what he’ll pursue — and how quickly — are still evolving.

Patrick Hand, center, joins a march to the National Rifle Association headquarters on Capitol Hill in Washington Monday. Curbing gun violence will be a top priority of President Barack Obama’s second term, aides say, but exactly what he’ll pursue — and how quickly — are still evolving. Photo by: AP Photo/Manuel Balce Ceneta

 

Dispatch Staff and Wire Reports

 

Investors shunned some of the nation's largest gun makers Tuesday, putting up for sale the manufacturer of the Bushmaster semiautomatic rifle used in the Connecticut school shooting and worrying that the attack could soon bring stricter gun laws. 

 

Stocks of other gun companies fell, and one sporting-goods chain said it would temporarily stop sales of military-style firearms.  

 

But in the Golden Triangle, sales of guns have increased, Gary Dedeaux, owner of Gary's Pawn and Gun, said today. Part of the flurry is in response to the holiday season, with its requisite home burglaries, and part is due to fears Congress is going to enact a tougher crime bill.  

 

In Washington, some former opponents of gun control signaled they may change their position, potentially giving stricter gun laws their best chance of passage in years. 

 

The most notable rejection of the gun industry came when the private-equity firm Cerberus Capital Management announced it would sell the maker of the rifle used in the massacre, which it called a "watershed event." 

 

Though Dedeaux sells the Bushmaster AR-15 semi-automatic rifle at his shop, along with Glock and Sig Sauer handguns, he said he has not sold the Bushmaster recently and only keeps a few in stock --selling them primarily to hunters. 

 

"So many sportsmen shoot these guns and go out for (target) practice," Dedeaux said. "We have seen more in the last two years, more people going out and shooting and getting used to their firearms." 

 

But he said safety is their top concern, particularly among his newest demographic, women and people over the age of 50. 

 

 

 

Renewed debate 

 

Still, the Newtown shooting has launched a national conversation about guns and reinvigorated the gun debate. 

 

In an acknowledgment of the changing political climate, the National Rifle Association promised "to offer meaningful contributions to help make sure this never happens again." It scheduled a Friday news conference. 

 

Bushmaster, Remington and DPMS are among the brands made by Freedom Group Inc., the largest firearms maker in the U.S. 

 

The Madison, N.C., company sold 1.1 million rifles and shotguns last year, along with 2 billion rounds of ammunition. Its customers include law enforcement and military agencies, as well as retailers who serve hunters and gun enthusiasts. 

 

Cerberus, a large private-equity firm best known for investing in Chrysler and other troubled corporations, appeared to have been under pressure from two sources: investors and the threat of more gun control. 

 

Officials at California's huge teacher pension fund said they were reviewing a $600 million investment in Cerberus in light of the Connecticut shooting. Through its stake in Cerberus, the California State Teachers' Retirement System owns a 2.4 percent stake in Freedom Group. 

 

Pension fund spokesman Michael Sicilia confirmed the fund owns about $4 million in shares of Sturm Ruger & Co. and $1.7 million in Smith and Wesson. Cerberus filed papers in 2009 to take Freedom Group public, but it withdrew the bid in 2011 without saying why. A Cerberus spokesman declined to comment Tuesday beyond the company's statement. 

 

Freedom Group has lost money in four of the last five years, according to financial filings on its website. Revenue in 2011 was $775 million, down from $848.7 million in 2009. Slightly more than half of its 2011 revenue came from guns, much of the rest from ammunition. 

 

The assault weapons ban that expired in 2004 restricted the sale of some types of guns like those made by Bushmaster. The adoption of a similar law "could have a material adverse effect on our business," Freedom Group said in a statement. 

 

Dedeaux has concerns about the same thing, but he has his doubts as to how effective it will be in preventing massacres like that at Sandy Hook.  

 

"That's not going to solve the problem," he said. "(Adam Lanza), according to the media, was deranged obviously. The kid was sick. How else could you shoot your mother? How could you shoot five and six-year-old kids?" 

 

And there are some checks and balances, he said. Before anyone can purchase a gun, they must fill out a form specifying whether they have a criminal background or have ever been committed to a mental institution. Their information is then turned over to the Federal Bureau of Investigation, who either approves or denies the sale.  

 

In 2010, Freedom Group said it would close its Bushmaster plant in Windham, Maine, and shift the work to a plant in Ilion, N.Y. At the time, New York Sen. Charles Schumer praised the move as a way to strengthen Remington's ability to compete for Defense Department gun contracts.  

 

Firms like Cerberus are basically privately run pools of money that invest in companies on behalf of pension funds. On Tuesday, the fund attempted to distance itself from the national debate. 

 

"It is not our role to take positions, or attempt to shape or influence the gun control policy debate," the firm said. "That is the job of our federal and state legislators." 

 

 

 

Retailer reacts 

 

Meanwhile, Dick's Sporting Goods Inc. suspended sales of all "modern sporting rifles," the industry term for military-style guns. The company also removed all guns from display at its store closest to Newtown. 

 

Dick's has not promoted military-style guns as much as some other retailers. Its circular distributed in newspapers on Sunday had a full page of hunting rifles, but no military-style ones. 

 

By contrast, St. Paul-based retailer Gander Mountain featured in its own flier the Black Rain Ordnance PG9, a military-style semiautomatic rifle, for $2,000. Other military-style guns were also advertised, including several from Bushmaster. Such ads are generally printed well in advance and would have been prepared before Friday's shooting. 

 

A Gander Mountain spokesman declined to comment on whether it would change its gun lineup. 

 

Wal-Mart Stores Inc., which offers Bushmaster rifles in some stores, said it would not change the guns it sells, but company spokesman David Tovar said the web listing for the Bushmaster "was taken down in light of the tragic events." 

 

Like at Gary's Pawn and Gun, store owners are finding that all the talk about additional gun control appears to be driving increased gun sales, rather than having the opposite effect. The Colorado Bureau of Investigation said it received a record 4,154 requests for background checks on Saturday, the day after the shooting. 

 

That was slightly more than on its normal biggest day, Black Friday. 

 

Bob Irwin, CEO of The Gun Store in Las Vegas, said customer traffic has jumped since the school shooting, with many customers concerned that more gun laws will be enacted. He has not pulled any guns from the shelf. 

 

"My belief is the individual nutcase did this," he said. "The company that manufactured the gun didn't. That seems silly to deprive my normal customers of product because somebody misused a product from the same company." 

 

Irwin agreed that the Connecticut attack demanded some kind of action. He suggested adding more security officers at schools. 

 

 

 

Gun stocks fall 

 

Shares in publicly traded gun makers declined for a third-straight day. 

 

Shares of Sturm, Ruger & Co. dropped 7.7 percent to close at $40.60. They have fallen almost 11 percent since Thursday, the day before the shooting. Shares of Smith & Wesson Holding Corp. fell 10 percent to $7.79 -- down almost 15 percent from their Thursday close. 

 

Outdoor goods retailer Cabela's Inc. fell almost 6 percent to close at $38.77.  

 

Dispatch News Editor Carmen K. Sisson, Associated Press writers Michelle Chapman and Jonathan Fahey in New York, Sandy Shore in Denver, and Judy Lin in Sacramento, Calif. contributed to this report.

 

 

 

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