Smith & Wesson shares fall 37% after Mexico lawsuit

Smith & Wesson, which manufactures firearms and ammunition, reported that its shares have fallen 37% in the last quarter.

The company claims that its revenues could be at risk if it obtains an unfavorable ruling in a lawsuit filed by the government of Mexico, according to a report sent to the U.S. Securities and Exchange Commission (SEC) and its shareholders.  

“An unfavorable outcome or prolonged lawsuit can harm our business. Lawsuits of this nature are costly, time-consuming, and diverts our management’s time and attention,” states the report.

The document claims that Smith & Wesson’s shares fell from $34.70 to $21.96 after the legal action presented by the Mexican government.

Mexico has accused Smith & Wesson of supplying weapons to Mexican cartels. The company said it will defend itself against this “aggressive” lawsuit and considers the accusations unfounded.

“We believe the allegations made in the lawsuit are without merit, and we intend to aggressively defend this action,” said Smith & Wesson in its report.

On August 4, Mexico’s Ministry of Foreign Affairs (SRE for its name in Spanish) announced a lawsuit against several U.S. gun manufacturers and distributors claiming that their business practices are “negligent” and contribute to the country’s violence.

The lawsuit was filed in Boston, Massachusetts against Smith & Wesson, Barret Firearms Manufacturing, Beretta USA, Colt’s Manufacturing Company LLC, Glock Inc, as well as the distributor Interstate Arms. The companies have until November 22 to file their response and present the legal defenses they deem appropriate.

The SRE estimates that around 500,000 weapons enter Mexico illegally, 70 percent of which come from the United States. The Ministry’s legal consultant, Alejandro Celorio, emphasized that the purpose of the lawsuit filed against Smith & Wesson is to obtain economic compensation for the damages caused by the illegal introduction of weapons into the country.