Shares of Scottsdale-based Taser International tumbled Friday after the stun gun maker said it is being investigated by the U.S. Securities and Exchange Commission about its safety statements and sales to a distributor.
The stock, which has been among the hottest on the NASDAQ market, plunged about 15 percent in value after the company released a statement saying it is cooperating with the probe.
The products, which deliver an electric jolt to the body and are used by law enforcement agencies to subdue unruly suspects, have been the criticized by human rights groups and others as being unsafe and causing unnecessary deaths. They want police departments to suspend the use of the stun guns until their safety has been more thoroughly tested.
Company officials say the stun guns have not been the direct cause of any deaths, and Taser CEO Rick Smith said the company stands behind the safety statements made by the company. "We are confident our statements are supported by the safety studies of our products," he said. “Our public statements about the safety of Taser devices are consistent with those of medical experts that we have consulted, or in the case of the Department of Defense, were reviewed and approved prior to release by the very agencies that have commissioned the research."
The SEC also is looking into a yearend $1.5 million sale of consumer versions of the stun guns and other law enforcement products to a Prescott firearms distributor, Davidson’s Inc., which some analysts have questioned because it appears to inflate Taser's sales to meet annual projections. Smith said the order “was received and shipped in the normal course of business . . . It followed a 60-day test market for our new X26C Citizens’ Defense System that included two of Davidson’s firearms dealers. As a result, we were pleased to secure Davidson’s as the exclusive distributor for this market segment . . . ”
The deal was questioned last week by Rob Miceli, analyst with the Scottsdale firm Gradient Analytics Inc. ‘‘It’s a deal that could maybe make a quarter,’’ he said. ‘‘Anytime we see something like that, it bears further investigation.’’
Davidson's CEO Bryan Tucker said there was no pressure from Taser officials to complete the deal before the end of 2004.