Two days ago, while going through the holdings of the Florida teachers pension fund which amount to over $37 billion, Bloomberg found a surprising entry: 41,129 shares in American Outdoor Brands (valued at a meager $528,000, including $306,000 in unrealized profits) according to a Dec. 31 securities filing listing the plan’s holdings. The company, formerly known as Smith & Wesson, is the market of the semiautomatic AR-15 assault rifle that was used in the Valentine"s Day shooting on the Marjory Stoneman Douglas High School in Parkland, Florida.
In addition to American Outdoors, the filing also showed that the Florida Retirement System Pension Plan also invested in gun company stock issued by Sturm & Ruger, Vista Outdoor and Olin Corp. All of these companies manufacture firearms or ammunition, including assault rifles.
Following the Tuesday news, we said that "we expect that these holdings will be liquidated promptly in the aftermath of the highly politicized shooting, and that the anticipation of said liquidation is why AOBC tumbled 5% today."
The case study for this was already present:
"after the 2012 Sandy Hook Elementary School shooting in Connecticut, in which 26 elementary school students and teachers were gunned down, CalSTRS and the California Public Employees’ Retirement System sold off their stakes in both Sturm Ruger and Smith & Wesson."
And, we predicted, "the same will take place over the coming days as the political scandal over the Parkland shooting peaks, and numerous pension systems seek to put pressure on gunmakers by dumping their stock."
It didn"t take long to get validation, because according to Bloomberg, the Florida Education Association is urging the state body that manages pension funds for its members to sell its holdings in companies that make a semi-automatic rifle used in the recent massacre at a high school in Parkland, Florida.
“I am sure that most of Florida’s public school employees are as sickened as I am to learn that the state has invested some of our pension fund holdings in the maker of the AR-15,” said association president Joanne McCall. “Surely there are better places for the state to invest its public employee retirement money than in companies that make products that harm our children.”
Still, McCall conceded that the teachers’ union is unable to divest from firearms industry stocks, or any others in their portfolio, on its own. “Unlike many states, the power to invest retirement funds belongs to political office holders,” she added.
The fund is managed by Governor Rick Scott and members of his cabinet. The Republican-controlled Florida legislature could also pass a bill calling for divestment. In 2016, legislation was passed to prevent state pension funds from being invested in companies that boycott Israel.
And now that one teachers retirement fund has officially demanded the liquidation of AOBC shares, we fully anticipated they all will, especially since the rest of the portfolio has generated such outsized gains in recent years.
“Given the recent events in Florida, it would certainly not surprise me to see other state funds divest their investment holdings in the industry," Rommel Dionisio, managing director of equity research at Aegis Capital Corp., said. “However, given there are so many other sources of investment capital available in the global financial markets, I have not seen meaningful long-term impact on the valuations of companies in the firearms industry from such divestment actions in the past.”
Meanwhile, the impact on American Outdoors stock was immediate, and after spiking at the open by 9%, AOBC is almost back to unchanged.
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