A familiar, yet seemingly surprising pattern always takes place after shootings and other gun-related atrocities in the United States: shares in gun firms rapidly rise. But why is this?
After all, whenever a business in any industry suffers a PR disaster, has data hacked or a customer service meltdown, it is common to see shares in said business fall heavily – much to the disdain of shareholders.
But this is not consistent across all industries. The short answer to the above question is that with every high-profile shooting comes fears that gun restrictions will be put in place. This causes a rush of sales, therefore increasing the financial position of gum firms. Read on for more.
Case Study: 2017 Las Vegas Shooting
One of the worst atrocities in American history came in 2017, when 64 year-old Stephen Paddock opened fire from his hotel room, killing 60 people attending a local music festival. The motive behind these murders has never been determined.
The shooting renewed the already highly-charged gun control debate. Due to public outcry, gun firms were criticised, with many calling for laws to be changed to strictly legislate gun ownership in the United States.
But instead of the shares in gun firms dropping, they actually dramatically rose. For example, shares in American Outdoor Brands, owners of the famous Smith & Wesson, saw a 3.2% rise in their opening value in just a day.
Meanwhile, the largest firearms manufacturer in the United States – Storm Ruger – closed at 3.5% higher in a day. This pattern has happened after the vast majority of mass shootings in the United States.
The reason behind this
The simple reason for this is that after every mass shooting, American citizens believe that gun laws will become more tightly regulated. This gives the feeling that there isn’t much time left to purchase a gun.
This leads to many citizens buying a gun – believing that they may not have a chance to do so for much longer. This surge of purchases boosts investor confidence in gun firms – resulting in shares rising.
What is public opinion in America on gun control?
The United States is a divided nation when it comes to gun control. Polls show roughly even support. Sometimes it works in a partisan manner, with Republicans typically against gun control, and Democrats supporting tighter measures.
There is strong support from the majority for increased background checks for all gun purchases, registering guns with the local police, and the banning of high-capacity ammunition magazines.
Many Americans have suggested that stricter gun control would not stop mass shootings. Areas like increasing spending on mental health and other preventive measures may be a better solution to the ongoing issues.
There is also the importance of adhering to the American Constitution, which states that a man has a right to bear arms. Going against the constitution is a highly-controversial subject that does not appeal to many Americans.
The Takeaway
Gun control always has, and always will, be a subject that causes fierce debate. Potential investors should be aware that gun manufacturers are known to be unstable in terms of share prices. It is also important to remember the human impact.
In the aftermath of the shooting, bump stocks – which allowed rapid-fire – were banned. But whether or not future restrictions will take place is unknown. We will have to wait and see what the future holds.
