The Connecticut school massacre: Are investors backing away from the gun business?

Cerberus Capital Management, a private equity firm, on Tuesday announced that it is selling Freedom Group, the manufacturer of the .223 Bushmaster rifle used to kill 20 children in Friday's horrible school massacre in Newtown, Connecticut. In a statement, Cerberus made it clear that its decision was not based on moral disgust with the gun industry. "We believe that this decision allows us to meet our obligations to the investors whose interests we are entrusted to protect without being drawn into the national debate that is more properly pursued by those with the formal charter and public responsibility to do so."

Cerberus bought Bushmaster in 2006, merging it with other gun companies to form Freedom Group. The principal reason for Cerberus' change of heart appears to be a threat from the California State Teachers Retirement System, one of the country's largest pension funds, to withdraw its $750 million investment in Cerberus in the wake of the tragedy. On Monday, Cerberus and its investors had been singled out for criticism by former New York Governor Eliot Spitzer at Slate:

Is Cerberus' move a harbinger for change in the private equity industry? It depends. The industry is heavily invested in firearms companies, which are expected to experience a surge in sales as gun enthusiasts load up in the face of possible action by Congress. Any divestment of gun companies will likely only occur along the Cerberus model. "Perhaps it should not be a surprise, but Wall Street will hardly take a leadership position in the conversation about gun control," says Andrew Ross Sorkin at The New York Times. "The more vocal stances could come from pension funds questioning their investments in gun makers."

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

However, other businesses are voluntarily backing away from guns, even without overt pressure from investors. Dick's Sporting Goods "pulled all guns from its store closest to the site of the massacre in Newtown, Connecticut, and suspended the sale of certain kinds of semi-automatic rifles from its chains nationwide," says Sakthi Prasad at Reuters. Walmart's website has dropped information about Bushmaster rifles, and Discovery Channel is canceling a reality show called "American Guns."

There is, sadly, at least one company in the firearms industry that may be ripe for investment. Amendment II, a company that specializes in lightweight body armor, says "sales have gone through the roof" for its line of bulletproof backpacks for kids, says Tim Murphy at Mother Jones.