Wall St. firm sells gun stake; others may follow suit

Updated
An AR-15 style rifle sits on the counter by Craig Marshall as he assists a customer at Freddie Bear Sports sporting goods store on December 17, 2012 in...
An AR-15 style rifle sits on the counter by Craig Marshall as he assists a customer at Freddie Bear Sports sporting goods store on December 17, 2012 in...
Scott Olson/Getty Images

The private equity firm Cerberus Capital Management announced Tuesday it will sell its majority shareholder stake in Freedom Group, the firearms company that makes the Bushmaster rifle used in the Newtown, Conn. school shooting. And now the pressure is increasing on other Wall Street firms with stakes in gun manufacturers to do likewise.

“It is apparent that the Sandy Hook tragedy was a watershed event that has raised the national debate on gun control to an unprecedented level,” Cerberus said in a statement. The company said  it was “shocked” and “deeply saddened” by the events at Sandy Hook Elementary, and that its decision to sell its investment in Freedom Group would allow it to avoid “being drawn into the national debate” on gun control.

Tuesday’s announcement came after a large pension fund, the California State Teachers’ Retirement System, said it was reconsidering its investment in Cerberus due to the firm’s stake in Freedom Group, which Cerberus created in 2006 after acquiring Bushmaster, and which also includes big-time manufacturer Remington Arms Company. The New York Times last year called Freedom Group “the most powerful and mysterious force in the American commercial gun industry today.”

Cerberus is the first Wall Street firm to distance itself from the firearms industry following the Newtown shooting—but it isn’t the only one with ties to the business.

Private equity firms control some of the largest gun makers in the country. Colt Defense, an offshoot of the .44-40 Colt revolver, is jointly managed by three funds—one operated by Sciens Capital Management, one by Credit Suisse, and one by the  Blackstone Group.

Blackstone spokesperson Peter Rose told msnbc.com on Tuesday that Blackstone has “planned for a long time” to end its relationship with Colt Defense, though he said the firm has no timetable for doing so.

Credit Suisse announced plans in July to sell the division of its asset management group that controls its Colt Defense investment, thus shedding its connection to Colt as well, bank spokesperson Calvin Mitchell told msnbc.com.

Sciens Capital Management did not respond to requests for comment.

Bushnell Outdoor Products, which makes gun accoutrements like laser scopes for semiautomatic handguns, is controlled by yet another private equity firm: MidOcean Partners.

Cerberus’s decision to get out of the gun trade suggests that, with the likes of President Obama, New York City Mayor Michael Bloomberg, and even NRA-backed politicians voicing the need for gun control, the tragedy at Sandy Hook could generate enough social pressure to shame gun manufacturers.

Smith & Wesson shares are down 22 percent since Friday, the day of the Newtown shooting; Sturm, Ruger & Co. shares are down 15 percent. Even so, gun shops across the country saw soaring sales over the past weekend. The tragedies in Blacksburg, Tucson, and Aurora have drawn plenty of similar anti-gun fervor, but they, too, have done little to slow the pace of gun sales. In the four days following July’s Aurora, Colo. movie theater shooting, gun sales increased 41 percent, thanks to both personal safety and fear of potential new gun restrictions.

Wall St. firm sells gun stake; others may follow suit

Updated