A huge gun investor exits the business

Cerberus Capital, a major private-equity company, is selling the unit that makes Bushmaster rifles. One of those guns is believed to have been used in last week's school shooting.

By Jonathan Berr Dec 18, 2012 1:49PM
Image: Stock market (Corbis)Private-equity group Cerberus Capital is getting out of the gun business, selling the company that made one of the guns used in last week's massacre at a Connecticut elementary school. But its change of heart is a little late in coming.

Cerberus is unloading Freedom Group, which makes the Bushmaster line of weapons. Adam Lanza is said to have used a .223 caliber Bushmaster AR-15 rifle to kill 20 children and six educators Friday. Now, calls for greater gun control are intensifying and at least one investor, the California State Teachers' Retirement System, is reportedly reviewing its business with Cerberus.

Cerberus entered the gun business in 2006 through its investment in Freedom Group. It sent condolences to the families of the victims in a press release Tuesday, but quickly added that its business broke no laws. It also said that it doesn't think "any single company or individual can prevent senseless violence or the illegal use or procurement of firearms and ammunition."

The company emphasized that it is mainly an investor group, not statesmen or policy makers. "It is not our role to take positions, or attempt to shape or influence the gun control policy debate," Cerberus said. "That is the job of our federal and state legislators."

Nonetheless, Cerberus has decided to immediately begin the process of unloading Freedom Group because it didn't want to be drawn into the growing debate over gun control. It's too late for that.

The military-style Bushmaster rifle is a hit with gun enthusiasts. One reviewer on Wal-Mart's (WMT) website noted that "it's as solid as the Colt I carried in Iraq and Afghanistan. It shoots great too! I have put 500 rounds through it with no problems, no misfeeds, no jams."

Though Cerberus noted that Freedom Group doesn't sell its products directly to the public, they are not hard to find. According to a recent SEC filling, the company estimated that about 13% of its sales in the recent quarter came through Wal-Mart. Some retailers, such as Dick's Sporting Goods (DKS), are pulling some semi-automatic weapons from their shelves. Wal-Mart has stopped showing the Bushmaster Patrolman's Carbine M4A3 rifle on its website as well, according to The Nation.

Perhaps Cerberus CEO Stephen Feinberg was motivated by his father Martin, who Bloomberg reports lives in Newtown, Conn., where the massacre took place.
The gun business hasn't been a home run for Cerberus. The firm called off its IPO of the Freedom Group last year. Rates of gun ownership have been plunging for years. Business, however, was rebounding this year and Freedom Group said in the filing that the industry "is currently experiencing a considerable increase in firearms and ammunition demand. In many areas, the market is expanding quicker than the industry can increase production."  

Plenty of hedge funds have benefited from the rising share prices of gunmakers Smith & Wesson (SWHC) and Strum Ruger (RGR), as Business Insider noted.

Whatever upside Freedom Group could bring Cerberus, however, clearly wasn't worth the trouble. Cerberus is worried about its potential legal liabilities and the lasting damage the school shooting will cause to its reputation over the long run. The public and investors shouldn't let the firm, best known for its disastrous investment in DaimlerChrysler, off the hook that easily.

--Jonathan Berr does not own shares of the listed stocks.  Follow him on Twitter @jdberr

More from Money Now

Dec 20, 2012 6:39PM
Why should we not let them off the hook?  They did nothing wrong.  There is no hook.  You are a libtard and I guess these 30 people are worth more than the thousands of victims of violent crime every year, and the 300 million Americans that rely on the constitution.
Dec 20, 2012 6:35PM
it's not the guns that are the problem it's the nuts that use them. you can't stop the nuts . outlaw guns the nuts will get them.
Dec 20, 2012 5:41PM

Sounds to me that CERBERUS CAPITAL enjoyed the profits the made with FREEDOM GROUP but now that there feet might be put to the fire they want out.

I hope they are unable to sell off or take a huge loss for there decision.

I  believe what there doing is more running away from what could be a problem, than a MORAL decision.

Dec 20, 2012 5:38PM
If I was an investor in Cerberus I would yank ALL of my money out of it RIGHT NOW!  Gun stocks are about to go sky high, in the short term, do to the impending weapons ban.  These idiots found it prudent to take their money out of the gun industry BEFORE riding this wave??  Talk about NOT having your clients best interest in mind. 
Dec 20, 2012 5:36PM
Yes Mr. President, there are two Americas. One that wishes to give it's freedoms and rights away to you wholesale, no questions asked, and one that wants to retain it's freedoms and rights for themselves by all means available including God and guns. The discussion needs to be had now about creating the two Americas, The United States of Democracy for the left and the Republic of the United States for the right. It is perfectly clear that you are president for only half of the people of this divided country and that you want to dictate your personal wills and preferences on all of us. The issue at hand today is about individual liberty, individual rights in a dangerous world and the freedom of individuals to procure and possess their liberty and rights. The first time it was about states rights, slavery and preservation of the union.
Dec 20, 2012 5:25PM
Only such a liberal and extreme left leaning columnist and publisher could possibly draw a correlation of responsibility between some nut-case pshcho murderer and an investment group.
Dec 20, 2012 5:17PM
America is a bad investment because of the political turmoil caused by a biased media
Dec 20, 2012 5:16PM
Gun Stock is through the roof! When Obama ram rods weapons bans, the stock will plummet. 

This guy bought low, and sold high. DUH!!!!!!!!!!!!!

"California State Teachers' Retirement System, is reportedly reviewing its business with Cerberus."

Yup, good ol' liberal teachers union. Hypocritical Buffoons.......................
Dec 20, 2012 5:11PM
The only reason Cerberus Capital is selling off its stock in Bushmater is they are afraid of losing their major investor which is controlled by teachers unions. Look it up. They are cowards, folding to this kind of pressure. Just like Wal-Mart and Dick's Sporting goods. Guess I will need to find a different place to shop.
Dec 20, 2012 5:07PM
Well here we r again a shooting happens and its blamed on the weapons not the person yes we need to get rid of the muslim president and for ur God he is sitting this one out i m truely sorry for the lost of all of the little angels.  My whole weapons platoon lost there lives when we were in lebanon on Oct 23 1983 cause we were a peace keeping force in a foreign country and we had a 50 cal on the roof with the order not to lock and load so only 5 of us made it out of there alive
Dec 20, 2012 5:06PM
Guns can be controlled,, crazy and mental illness can not be.
Dec 20, 2012 4:52PM
kind of funny that the reports say he used two 9mm pistols to kill all those kids and the ar-15 was found outside. the media goons are a$$es. anything to lean the argument the way the feds want it to lean. viva la sporting rifles (assault rifles). by the way.....there are no such guns sold to the general public. this is what the liberals call them. it's illegal to sell real "assult rifles"...which means fully automatic (class 3) or military rifles to the public without a thorough background check, heavy fees, permits, and red tape. all weapons described as "assult rifles" are classified as sporting rifles and have to meet certain ATF standards to be legal and classified as a sporting rifle. these rifles are no different than any other rifle other the furniture they have on them. besides that....he didnt even use this weapon. put an old fashion wood stock on an AR-15 action and it looks like any other hunting rifle. hypocrits!!! tobacco kills more people than any other thing in this country but you don't see anything being done to ban that....too much revenue from tobacco.
Dec 20, 2012 4:46PM
A good friend of mine who is married to a man who has Asperger's Syndrome said that it takes little or nothing to upset and set off someone who has this malady. In all likelihood, barring significant evidence recovered from the damaged computers found in the house, we may never have any evidence for Lanza's motivation. It is also my understanding that the AR-15 rifle was left in Lanza's vehicle and was NOT used. He took the two pistols along with additional clips of ammunition instead. If the teachers in the school, as bizarre as this suggestion may seem to some, had had the training and capability to resist this man they might have been able to save the lives of a number of the children under their care and protection. Insofar as our culture being "gun crazy" as some would put it, much of the responsibility for this outlook has to be placed squarely at the doorstep of the Hollywood community. There is scarcely a movie that has been produced since the 1950's that has not featured the use of a firearm, and these days, the extensive use of same (in many cases illegally to boot) is ubiquitous and commonplace.
Dec 20, 2012 4:45PM

Sounds like Cerberus is taking their profit before prices and sales fall from the inevitable controls which are likely to be imposed.  I would not make it sound like they are just now "realizing their errors," it is nothing more than a financial decision.


Dec 20, 2012 4:33PM
I don't remember the company that made the fertilizer McVeigh used to murder 168 people having to apologize for making their product...
Dec 20, 2012 4:31PM

In My humble Opinion, jonathan berr, author of this "Blog", ( it sure as hell Aint responsible reporting) Is a punkazzed dork,, Thats My Opinion!


"The public and investors shouldn't let the firm, best known for its disastrous investment in DaimlerChrysler, off the hook that easily."

Jonathan Berr does not own shares of the listed stocks.

Dec 20, 2012 4:24PM
Ask them to donate all the proceeds from the profits they made on their invetment to the victims families from gun violence and then maybe this article has some credibility - trying to be holy after the fact and they made millions investing while the sales were going up because of Barry being in office - now that they can't make money they get out and MSNBC tries to glorify their action?  Get real - donate every dime they made and then you have a story
Dec 20, 2012 4:22PM
The thing that gets me i watched the news as it un raveled and i personally watched live as the swat team broke open the trunk of the car that adam lanzar drove to the school. At this time the swat member reached into the car and pulled out the bushmaster AR and handed it to another member of there team as he finished searching the car. This was on live coverage but i cant find the video anywhere. Come on guys am i the only one that caught this. The media had so much miss information in the beginning as the story unfolded that now they are trying to pass off the AR ASSAULT RIFLE ( if you choose to call it that) was the weapon that killed these poor children. I watched the video as they removed it from the car outside the school , in a parking lot !! someone needs to explain this to me because it looks as those someone is just trying to use this weapon as the blame for the violence when actuality i don't believe it was even brought n the school. The AR is actually very hard to carry as a CONCEALED weapon. someone please say they saw the video of dismantling the car and the AR being pulled from the trunk outside.
Dec 20, 2012 4:17PM
Political frenzy plus stupidity of mind from government brainwashing over the years creates a public stampede; yes in some cases humans act like frightened cattle, like now!
Dec 20, 2012 4:06PM

Stop selling airplanes because highjackers can fly them into buildings


Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

Trending NOW

What’s this?


[BRIEFING.COM] The stock market finished an upbeat week on a mixed note. The S&P 500 shed less than a point, ending the week higher by 1.3%, while the Dow Jones Industrial Average (+0.1%) cemented a 1.7% advance for the week. High-beta names underperformed, which weighed on the Nasdaq Composite (-0.3%) and the Russell 2000 (-1.3%).

Equity indices displayed strength in the early going with the S&P 500 tagging the 2,019 level during the opening 30 minutes of the action. However, ... More