Smith & Wesson Brands Inc. SWBI faces increased legal scrutiny as Mexico’s landmark lawsuit against U.S. gun manufacturers reaches a critical juncture at the Supreme Court, potentially creating new liability risks for the firearms industry.
What Happened: The lawsuit, filed in 2021, alleges that Smith & Wesson and other defendants enabled gun trafficking to Mexican drug cartels through their business practices. According to ATF data reviewed by CBS News, an estimated 200,000 to 500,000 U.S. firearms are smuggled into Mexico annually, with 75% of confiscated weapons originating from the United States.
The case challenges traditional liability protections enjoyed by gun manufacturers under U.S. law. Mexico’s legal strategy, spearheaded by attorney Jonathan Lowy, argues that manufacturers are “aiding and abetting” gun trafficking by continuing to supply dealers with questionable sales patterns.
Why It Matters: Smith & Wesson has denied the allegations as “not true.” The firearms industry has petitioned the Supreme Court, arguing that allowing such lawsuits could subject manufacturers to costly litigation from foreign entities attempting to influence U.S. gun control policies.
The lawsuit’s scope extends beyond manufacturers to include five Arizona-based gun dealers. Internal ATF documents revealed that 566 guns recovered in Mexico over a four-and-a-half-year period were traced to these dealers, with nearly 200 coming from a single retailer near Phoenix.
Aside from the Mexico lawsuit, Smith & Wesson has also faced challenging market conditions weighing on its earnings – the company attributed its weaker second-quarter earnings to inflationary pressures impacting consumers’ spending.
Price Action: Smith & Wesson Brands Inc. closed on Friday at $10.04, declining 1.47%. Over the past month, the stock has dropped 27.1%, according to data from Benzinga Pro.
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