Trump’s support for the NRA just backfired bigly in the faces of gun companies

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Here’s an irony: The bankruptcy today of historic gun and rifle maker Remington Outdoor has largely been caused by Trump’s embrace of guns and the NRA. 

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When Barack Obama was president, gun lovers stocked up at a record pace because of the delusional fear that the government was about to come and take their guns away.

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As sales soared, many gun manufacturers borrowed money to ramp up production to meet the expected demand, which meant they had a big debt to service.

Once Trump – who called himself a “true friend and champion” of the gun industry at a National Rifle Associaton convention, the panic was replaced by complacency and gun sales plunged. 

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In 2017, according to the Dallas Morning News, the number of firearm background checks “declined faster than in any year since 1998, when the FBI first began compiling that data.”

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While the NRA would make it sound like every American owns a gun, actually only about one-quarter of adults in the U.S. are gun owners, and within that group, a tiny handful is what are called “super-owners” who acquire and store disturbingly large stockpiles of guns.

Harvard University and Northeastern University did a study that showed the number of guns in America grew by more than 70 million to about 265 million between 1994 and 2015, reports the Dallas Morning News, adding: But half of those guns are owned by only 3 percent of the population.”

The fact the base of those who buy a lot of guns is so small makes the industry’s customer base extremely unstable, so under President Obama, it soared and with Trump, it dropped. 

Remington, which has been making guns since 1819, is not the only gun manufacturer under pressure from this sudden shift. In 2015, Colt Holdings Co. filed for Chapter 11 bankruptcy while Obama was still president.

The shares of most gun makers are down including Ruger & Co., whose stock has fallen 18 percent just this year so far.

Some of the big funds that own a lot of gun maker stocks, including Wall Street giant Black Rock, have been asking manufacturers like American Outdoor Brands and Vista Outdoor Brands how they are going to respond to the recent school shooting tragedy in Parkland, Florida, and how they are dealing with the growing protests.

Some retailers have cut back on gun sales, raised the age limit for sales or dropped the sale of guns completely which also raises issues for the gun makers.

Dick’s Sporting Goods will no longer sell assault rifles while Fred Meyer is eliminating the sale of all guns and ammunition from its stores, among others.

Walmart and LL Bean have said they will no longer sell guns to anyone under age 21.

There are also new laws being considered or enacted.

In Florida, after the Parkland massacre, Gov. Rick Scott, a Republican who has championed gun rights in the past, signed a bill that raises the age for the firearms from 18 to 21, and imposes a waiting period of at least three days on the sale of long guns (rifles) while a buyers background is checked.

Remington is still dealing with legal actions relating to the 2012 Sandy Hook Elementary School shooting, but that is a small issue compared to the slumping sales of everything from pistols to their Bushmaster AR-15 assault rifle, which is the type used in Sandy Hook, and the Orlando, Las Vegas and Parkland shootings, among others.

For the most part, the courts have ruled the gun maker is not responsible for the use of the assault rifle in Sandy Hook, but the legal battles have left the company toxic to many investors who fear in future shootings they will be held liable.

However, there are still some liability cases that may cost them big payouts.

The company based in Madison, North Carolina saw this problem coming long before hundreds of thousands of kids took to the streets to protest and demand sensible gun reforms over the weekend.

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Before the announcement today, it had worked out a “prepackaged” bankruptcy deal with its largest debtors.

The largest group of debtors who hold a $550 million term loan get 82.5 percent of the stock in the post-bankruptcy company, while third-lien noteholders get 17.5 percent and four-year warrant holders get 15 percent.

So the Remington bankruptcy is somewhat related to the mounting protests, and the cutbacks by some big retailers, but it is the assurance under Trump that guns will continue to be sold, and will not be confiscated, that has killed gun sales.

It is safe to say Remington would still be shooting for the sky if our president’s name was Clinton – but under Trump, the gun manufacturers who support the NRA, in an economic sense, are shooting blanks.

Benjamin Locke

Benjamin Locke is a retired college professor with an undergraduate degree in Industrial Labor and Relations from Cornell University and an MBA from the European School of Management.

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