Gun Control Debate: Multiple Lenders And Investors, Including GE Capital (NYSE:GE-A), Cerberus Capital Management LP And Tiger Global Management LLC Are Backing Away From The Gun Business

on April 25 2013 2:21 PM
Gun Store
An employee answers a customer's question at the Cheaper Than Dirt gun shop in Fort Worth, Texas, in 2008. AP/LM Otero

While the Newtown massacre and the subsequent extended gun-control debates have done nothing to slow business for gunmakers and sellers, these recent events seem to have made some investors and lenders a bit gun-shy. 

A number of prominent hedge funds, pensions, financial institutions and private equity firms have withdrawn from the gun business recently. But based on the share prices of publicly traded gunmakers, gun show attendance and gun sales, these moves may be more of a social statement than anything else.

GE Capital

GE Capital (NYSE:GE-A), in Fairfield, Conn., this week announced it will stop offering new consumer financing services to gun retailers. Existing financing agreements will continue, and the cutoff will apply only to retailers whose main merchandise is guns. This means its new rule won't affect Wal-Mart Stores Inc. (NYSE:WMT), Cabelas Inc. (NYSE:CAB), Bass Pro Shops or other sporting goods stores that sell a variety of products. GE Capital, the finance arm of General Electric Company (NYSE:GE), said that, following a review of its lending practices, it will implement a policy that is more rigorous than its 2008 policy. However, company spokesperson Russell Wilkerson said in a written statement that GE made the move after "a more rigorous audit process in our sporting goods segment in light of industry changes, new legislation and tragic events that have cause widespread reexamination of policies on firearms. This process has affected less than 75 retailers (approximately .001 percent of all gun retailers) and [is] an immaterial part of our sales volume." 

Cerberus Capital Management

Investor pressure immediately following the Sandy Hook Elementary School shooting drove private equity firm Cerberus Capital Management LP to put up for sale Freedom Group Inc. Freedom Group is the nation's largest long-gun maker and parent company of Bushmaster Firearms International LLC, maker of the semiautomatic rifle that Adam Lanza used to kill 26 students and staffers at the school. 

Tiger Global Management

Tiger Global Management LLC, a private hedge fund firm in New York, sold its 4.2 percent stake in Sturm, Ruger & Company (NYSE:RGR) in February in response to pressure from gun control advocates.

CalPERS

Members of the California Public Employees' Retirement System, or CalPERS, the biggest public pension fund investor in the U.S., voted in February to divest $5 million worth of stocks and other securities in gunmakers Smith & Wesson Holding Corporation (NASDAQ:SWHC) and Sturm Ruger.

Big Commercial Banks

Wells Fargo & Co. (NYSE:WFC) ended its gun-connected investments in 2004 for business reasons, company spokeswoman Lisa Westerman told the Wall Street Journal. Citigroup Inc. (NYSE:C) says it doesn't finance firearm loans, according to Citi spokeswoman Liz Fogarty. Bank of America Corp. (NYSE:BAC) would not comment on whether it provides consumer financing for firearms, according to the Journal.

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