How can this be happening?
After Adam Lanza shot 20 children dead in a Connecticut primary school with his mother’s Bushmaster XM15-E2S rifle, public discourse turned swiftly to the well-hashed gun control debate. Legislation was proposed, teacher gun-training groups launched, Bushmasters flew off shelves in fear of an impending ban. Meanwhile, the markets were moving.
Arms manufacturers Smith & Wesson, Cabela’s and Big 5 all boasted sterling third quarter results in the post-Sandy Hook gun boom. A number of big retail chains moved to end sales of AR-15s and similar assault weapons in the wake of the shooting and Cerberus Capital, the New York firm that owned Bushmaster, sold the company, calling the Connecticut shooting a “watershed event.” But a small number of hedge funds, accustomed to a sadly familiar pattern (gun massacre, leads to fear of gun bans, leads to mass gun sales), moved to make bank on the tragedy and this predictable trajectory.
In an unremarkable February report, Bloomberg News noted that Owl Creek Asset Management LP bought 1.62 million Smith & Wesson shares around the time of the Sandy Hook shooting. Although the precise date of the acquisition is not known, the implication is that the investment was made days after the massacre. On Monday, activist publicity organization Sparrow Media pushed the story a stage further, highlighting the hedge fund managers behind the purchases.
Woah.
Whether Owl Creek or Impala have followed similar investing patterns in the wake of previous gun massacres is not currently known. Based on the hedge funds’ post-Sandy Hook behavior alone, however, activists are naming and shaming fund managers and demanding divestment from the blood-stained stocks.
Blood stained stocks? Indeed.
