Things were going great for Taurus.
The Brazilian gunmaker, the largest weapons manufacturer in Latin America and a major supplier of arms and armor to Brazil’s police and army, saw its share price surge as far-right politician Jair Bolsonaro got closer and closer to the presidency.
During the election campaign, Bolsonaro promised to toughen policing and relax gun regulations to address the country’s rising violence. Brazil’s murder rate set a new record in 2017.
On the prospect of more sales, Taurus’s share price quintupled, with particularly big gains after Bolsonaro won the first round of voting on Oct. 7, going into the run-off as a heavy favorite.
Then, Bolsonaro was elected president on Oct. 28. Taurus promptly crashed, giving up most—but not all—of its previous gains. Since Bolsonaro’s election, the gunmaker’s stock has fallen by around 60%.
The drop may seem counter-intuitive. If anything, Bolsonaro’s violent rhetoric, and his plans to crack down on crime, mean that Brazil will need more guns—many more.
That may be true, but “there was an exaggeration,” Glauco Legat, an analyst at broker Spinelli, told Bloomberg. Taurus’s financial situation, defined by Legat as “critical,” didn’t justify the strength of the pre-election surge.
Earlier this year, in the wake of a scandal involving accidental discharges of Taurus guns, investors had soured on the company’s prospects. The firm had been filing losses every year since 2013, and was struggling under a big debt load.
Then came a shot from the president-elect himself. An old video has recently circulated on social media that shows Bolsonaro promising to end the monopoly that domestic firms have in Brazil’s gun market. Taurus supplies the police and army in part due to protectionist rules that shields it from foreign competition. In the video, Bolsonaro threatens to end these protections.