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.
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
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"Assault Weapon" can be a rock, baseball bat, pencil, even your hands. He could have just as easily killed these women and children with a 1940's style .22 revolver. They were sitting ducks! And for the Syracuse coach, please keep your ignorant, anti-gun political comments to yourself. As long as a criminal may have an "assault weapon" with 30 rounds or more in the magazine, I need to be able to have one to protect myself from them. Gun laws have been demonstrated to not work over and over in other countries as well as here in the states. The most gun-restrictive cities in our country have the highest violent gun-related crimes. The simple reason is that law-abiding citizens are the only people that listen to gun laws! CRIMINALS WILL NOT OBEY GUN LAWS!!!!! The liberals in this country have got to have an agenda.....no thinking person can legitimately say they don't understand this concept.
Bushmaster is just one of dozens of AR-15 makers. They flatter themselves if they think they are that significant. Cerberus is more likely concerned that profits will no longer meet expectations.
Most AR15 makers just assemble parts from other manufacturers onto their branded receiver. It ain't rocket science. The last assault weapon ban actually greatly boosted the sales of AR15s because it eliminated the importation of competing firearms. As the law was written, all you had to do was remove the bayonet lug and the flash hider and you no longer had an assault weapon. America felt safer though.
The problem with society today is a total lack of RESPECT and RESPONSIBILITY.Until people respect one another,and are held responsible for their actions,nothing will change. The objects that people abuse may change,but unless the root of the problem is addressed...individual responsibility and respect for others, the senselessness will continue...
This is not an unbiased article of news. The last sentence of the article destroys any hint of actual journalistic reporting.
it willl never stop humans have flaws jus like all other creatures we built it and its here to stay legal or illegal eitherway
The Connecticut school shooting was an unspeakable tragedy. Words cannot describe the horror that occurred. Unfortunately, it seems the loudest voices in the media are continually confused about the weapons they push to ban. Take the sentences above that quote the Wal-Mart customer and change the subject from a gun to a car. “It drives great too! I’ve put 500 miles on it with no problems…” Would the author be equally shocked and “baffled” as to why anyone would need to drive 500 miles with any car? The reviewer is talking about 500 rounds total, not 500 rounds in a minute or even a single trip to the range. Guns are and will continue to be prevalent in our country. We need our politicians to find a way to stop the wack jobs from getting their hands on them, not wave our magic wands and make all guns everywhere disappear. We also need our media to do some research (or at least think before they publish) and be honest.
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[BRIEFING.COM] The major averages ended higher across the board as the S&P 500 advanced 0.8%.
Equities climbed steadily since the opening bell as investors prepared for tomorrow's policy decision from the Federal Reserve. Although chatter in recent weeks has included speculation the Fed would look to taper its asset purchases, today's broad gains suggest investors expect mostly reassuring words from Chairman Bernanke at tomorrow's press conference.
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