American Rebel shoots for Nasdaq listing
Updated
Gun sales have caught fire in the United States over the past two years, and that’s led one company that promotes its products for the “concealed-carry lifestyle” to pursue a Nasdaq listing to raise $20m (£14.7m).
American Rebel, which identifies itself as “America’s Patriotic Brand,” sells safes for gun storage, plus accessories, alongside backpacks, jackets and vests that feature pockets designed to conceal handguns. They also sell light kits and handgun hangers.
In a telephone interview with Capital.com, American Rebel president Doug Grau was asked if America’s surge in gun sales led to the timing of its proposed offering and pursuit of a Nasdaq listing.
“Yes. The short answer would be yes,” Grau said. “There is a lot of interest in our products, partly because of the overall interest in guns, but also a lot of interest in safe storage, and being a responsible gun owner and making sure you know where your guns are, and also protecting them from water damage, fire damage and theft.”
Filed with SEC
On its website, American Rebel outlines its mission and purpose.
“In a time when national spirit is being rekindled, American Rebel positions itself as ‘America’s Patriotic Brand’. We are proud advocates of the Second Amendment and encourage safe and responsible gun ownership.”
American Rebel Holdings filed its amended Form S-1 on 18 January. Its shares have been listed on the OTC Markets Group since late 2015 and were trading around eight cents each as of 21 January.
Grau said the company is planning to close the current offering simultaneously with the up-listing of its stock from OTC to Nasdaq, and it intends to execute a reverse split of the OTC-listed stock.
For the nine months ended 30 September 2021, American Rebel reported gross revenue of $848,000 with a net loss of nearly $4.9m. Revenue for the same nine months in 2020 was $899,000, and the net loss was $4.6m. For 2020, American Rebel reported a net loss of almost $6m on gross revenue of $1.26m.
Country music founder
Grau said those losses can be attributed to the cost of being a public company, including charges to the bottom line for stock-based compensation given to employees and founders of the company.
“There’s quite a large expense of just being a public company, even on the OTC,” Grau said.
“There are a lot of non-cash items that are involved when you’re setting up a company and getting ready to go public, and you can (use) stock for consultants and people that are helping you do this offering.”
Founded near the end of 2014, American Rebel Holdings was incorporated in Nevada, but its headquarters are in Nashville, Tennessee. It also maintains a sales office in Lenexa, Kansas. American Rebel founder and CEO Charles A Ross, who goes by Andy Ross, is also a country music singer and avid bow hunter.
American appetite for guns
An economist who studies the gun industry said the timing of American Rebel’s Nasdaq bid makes sense given the enormous appetite Americans had for guns in 2020 and 2021, a phenomenon that has been attributed to several factors.
“It’s probably a good time to raise capital and have expansion plans, that may then allow American Rebel to bolster their competitive standing in the market,” said Jurgen Brauer, the principal and chief economist at Small Arms Analytics & Forecasting, in an interview with Capital.com. Small Arms Analytics & Forecasting is a research firm Brauer founded in 2014 that focusses on the “business and economics of the global small arms and ammunition markets.”
Record-breaking gun sales
Brauer’s research reveals that approximately 22.8 million guns were sold in 2020, a 64% increase from 13.9 million guns sold in 2019. In 2018, sales almost matched 2019, landing slightly lower at 13.8 million. Although the numbers began to soften in 2021, when an estimated 19.9 million guns were sold, that was still considered a strong year by industry players given the large jump in sales from 2019 to 2020.
The 2020 sales numbers were a record high since NICS (the National Instant Criminal Background Check System) began making full-year data available in 1999. These figures include handguns and long guns, plus an “other” category for items that don’t fit neatly into the other two categories, such as shotguns with a pistol-type grip, and sound suppressors, which also require background checks.
“Given the FBI's raw data, the ‘other’ category cannot be wholly disentangled to take out the sound suppressors, for instance,” Brauer explained. “But the proportion of ‘other’ is reasonably small in the overall scope of things.”
Background checks hit high
The FBI reported that NICS firearms background checks hit an all-time high in January 2021 at more than 4.3 million, but that number was soon surpassed in March, when there were almost 4.7 million checks. But Brauer cautions those numbers can’t be equated to actual gun sales, as they also include figures for the states that run checks on existing permit holders.
In addition to his work with Small Arms Analytics, Brauer is an author, a former economics professor at James M. Hull College of Business at Augusta State University, and the former vice-chair of Economists for Peace and Security, a United Nations-accredited global organisation based in New York that “promotes non-military solutions to world challenges.”
Fear is common denominator
Brauer discussed some of the reasons the steep increase in US gun sales might have occurred. All of them have one element in common: fear.
Brauer said Americans’ drive to stock up on firearms began with the fear and uncertainty of the pandemic, particularly at its onset when some states forced closures on non-essential stores, including those that sold firearms.
“That certainly created a bit of a panic reaction by folks who said, ‘No, no, they are essential for personal security and the security of our property,’” Brauer said. “Along with that, you had supply chain shortages which continue to this day. That made it hard to deliver ammunitions and firearms into the stores.
“You have a snowballing effect where things go out of control and people purchased firearms and ammunition even as prices were rising. All of that subsided to some degree in 2021, but not as much as one might have thought.”
Brauer added that pandemic-fueled angst was “then further stoked by the killing of [George] Floyd in Minneapolis in late May 2020 and riots and unrest and discontent across all 50 states at the way the police were handling that particular case. So people became fearful even as the pandemic was very much in their mind. Fearful that security forces – meaning local police forces – may not be there when you call them, and even when they come, they might not act in your favor.”
State guns laws vary
In the United States, gun laws vary from state to state. Some states make it harder than others to carry concealed firearms, requiring a permit or even that the applicant demonstrate they have good cause for carrying the weapon. But many states are considered “constitutional carry”, which means they allow people to carry guns around without a permit or a licence.
In its website text, the company explains why American Rebel products appeal to its customer base.
“Not everyone wants to be recognized or wear military-style solution. American Rebel concealed carry products meet that criteria and function perfectly in every day situations.
“Concealed carry solutions can be stylish and people are unlikely to change that. For that reason, American Rebel designs products with style, quality and interactive technology so you can blend in and avoid attention.”
American Rebel retails its product online as well as selling wholesale to brick-and-mortar shops. It recently added a new line of safes to its product line that were created for cannabis dispensaries, growers and processors to store inventory.
Rebels and patriots
Capital.com asked Grau about the meaning behind the company’s passion for patriotism as it applies to being an “American Rebel”.
“I understand how somebody could come up with a negative connotation to the word rebel – to say ‘Oh, that’s somebody who’s not following the rules.’ But we really look at it as somebody that is taking control of their own future, that’s being bold, and really just going with a lot of enthusiasm with their goals, and all in. Somebody’s that getting everything out of the day that they can.”
Grau added that being an American Rebel means “somebody that stands up for what’s right”.
Gross proceeds target $20m
In its offering, American Rebel Holdings intends to issue units that each consist of one share of common stock plus one warrant. The units would be immediately separable upon issuance. American Rebel plans to issue enough units to raise gross proceeds of $20m, and the number of units offered will be adjusted to hit that target. At $4.65 per unit – the mid-point of the estimated offering price range of $4.15 to $5.15 – that would be about 4.3 million units. The exercise price of the warrants, which are set to expire in five years, is $5.81 each.
The company has applied to trade on the Nasdaq Capital Market under the ticker symbol AREB for the shares, with the warrants under AREBW. The company plans to cancel the offer if Nasdaq doesn’t approve its application. If it is approved to go forward, the prospectus stated the company expects the stock will no longer be quoted on OTCQB.
American Rebel plans to use almost $3m of the proceeds to repay outstanding debts and another $15m for general corporate purposes, including $2m for working capital, $500,000 for research and development, and $12.5m to fund growth.