Gun Control Debate: Multiple Lender And Investors, Including GE Capital (NYSE:GE-A), Cerberus Capital Management LP And Tiger Global Management, LLC Are Backing Away From The Gun Business
By Malik Singleton | April 26, 2013 4:21 AM EST
Events of the last five months, from Obama's reelection to the Sandy Hook Elementary School shooting to Congress' gun debate, have done nothing to slow down the surging sales of gun makers and gun retailers.
But gun control advocates may be hoping that turning off the financial spigot succeeds where current events have failed. A number of prominent hedge funds, pensions, financial institutions and private equity firms GE Capital (NYSE:GE-A) have withdrawn from the gun business recently. But based on the share prices of publicly traded gun makers plus gun show attendance and sales, it may be that such moves do anything more than make a social statement.
GE Capital announced this week that it will stop offering new consumer financing services to gun retailers. Existing financing agreements will continue and the cutoff will only apply to retailers whose main merchandise is guns. This means its new rule still 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. Fairfield, Conn.-based 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 re-examinatino of policies on firearms. This process has affected less than 75 retailers (approx. .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 in Connecticut 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 the elementary school students and staffers.
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 following pressure from gun control advocates.
Members of the California Public Employees' Retirement System (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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