Why do gun and ammo stocks rise after mass shootings?
On May 24, a gunman opened fire at Robb Elementary School in Uvalde, Texas — killing 19 children. This happened less than two weeks after a Buffalo, New York supermarket shooting that killed 10 people.
Historically, gun sales have risen after mass shootings and news of potential legislation.
But why? Researchers offer two potential reasons for the rise in sales:
- People purchase firearms for protection, in fear.
- Legislation could prevent future purchases, and people stock up in anticipation.
The two largest gun makers in the U.S. — Sturm, Ruger & Company (NYSE:RGR) and Smith & Wesson Brands (NASDAQ:SWBI) — rose 4% and 7%, respectively.
Like every other time: Stocks go up, attention moves away from the news and legislation fails to pass the White House. This time, lawmakers have called for legislation again on gun controls that will likely fail to pass the White House.
- Last year, two bills that would expand background checks on gun sales passed the House but stalled at the Senate level — never seeing the light of day.
- On Tuesday, Senator Chuck Schumer moved to force these two measures back on the Senate calendar — potentially forcing a vote in the next few days.
Per Politico, most Democrats don’t see a path forward on the bills — which need 10 Republican votes.
Immunity: The Protection of Lawful Commerce in Arms Act (PLCAA), enacted in 2005, protects gun makers from most civil lawsuits — disincentivizing them from consumer safety. One state is going after them.
- In 2020, New Jersey’s attorney general subpoenaed Smith & Wesson Brands for advertising fraud.
- But the case is about more than advertising. Per NYT, the subpoena could expose the “inner workings of the gun industry” for the first time.
The case could turn around the gun industry just like it did with the tobacco industry — when courts ruled that they were lying about health effects for decades — turning the public against them.