If a business suffers a PR disaster, has data hacked or has a customer service meltdown, it is common to see shares in said business fall heavily. It could be expected that this process would be the same across all industries. In reality though, this is not the case. When an atrocity happens, like the recent Las Vegas shooting, shares in gun manufacturers actually rise – substantially too. So why is this? It would be expected that an atrocity would have the opposite effect. The answer is surprisingly simple.
To put this situation into context, shares in ‘American Outdoor Brands’, the owner of established gun-manufacturer ‘Smith & Wesson’ – closed at 3.2% higher than their opening value, while ‘Sturm Ruger’ – the largest firearms manufacturer in the US, closed at 3.5% higher. Similar occurrences have taken place in the wake of events such as the tragic nightclub attack in Orlando, Florida in 2016. So what could possibly cause this? Read below to find out.
The simple, yet somewhat sad reason, is that due to these atrocities, American citizens think that gun laws will become more tightly regulated. This gives the feeling that there isn’t much time left to purchase a gun – leading to a mass panic to attain a weapon. This boosts investor confidence in gun firms – resulting in shares rising. In the United Kingdom, a similar phenomenon was seen a few years ago when a supposed fuel shortage led to forecourts across Britain being overcome with motorists wanting to fill up their fuel tanks, eventually causing a shortage which could’ve been avoided.
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It appears however that gun laws might not be changing any time soon, despite widespread opposition. The topic often attracts heated debate, as seen here. However before you go out and purchase shares in a gun manufacturer, beware that they are renowned for being unstable. It is unfortunate that events like these happen, and this case is another example of the knock-on effects that atrocities can have. The debate over gun laws in the US are sure to continue going forward.