Axon’s Political Gamble: What Shareholders Should Know

By Vanessa Rogers

A Public Company Playing a Very Expensive Local Game

Axon Enterprise is no stranger to big bets. But its latest wager may be the riskiest one yet: pouring money into Scottsdale city council races through a political action committee, while the company’s stock sits roughly 27 percent below where it started the year.

That is not a great time to be making political enemies.

Axon and CEO Rick Smith each contributed $500,000 to a PAC called Arizonans for a Better Future, with Axon president Josh Isner adding another $100,000. That PAC has already spent $582,000, including funds directed at TV ads attacking Councilman Barry Graham. As the East Valley Tribune reported, Graham alleges Axon “wants to destroy my resident-friendly reputation.”

This is the definition of dark money politics: a corporate-funded PAC targeting local candidates who oppose a rezoning deal that benefits the company. It is aggressive. It is expensive. And history suggests it may not work.

The Stock Is Already Under Pressure

Axon shareholders have had a rough year. AXON shares currently trade around $471, down 38.6 percent over the past year. The stock hit a 52-week low of $339 in April, including a 10 percent single-day drop. Against that backdrop, Axon president Isner sold over $6 million in company stock in early June. Investors paying attention to insider transactions rarely find comfort in that kind of activity.

Axon’s own 10-K filing flags that litigation, government inquiries, and regulatory actions may result in significant costs and divert management attention. The company wrote that disclosure about its core business. The political spending in Scottsdale adds an entirely new layer of reputational and regulatory exposure on top of it.

Axon CEO Rick Smith. Photo Credit: Jim Poulin, Phoenix Business Journal

What Investigation Risk Looks Like

The Arizonans for a Better Future PAC has been aggressive in its spending and its attacks. If that spending attracts scrutiny from Arizona campaign finance authorities or triggers a complaint to the FEC, Axon could face exactly the kind of government inquiry its own SEC filings warn investors about.

We have written previously about how big-money campaigns in Scottsdale elections have backfired. Forceful outside spending has a spotty record here. Voters who feel they are being pushed around often push back. The July 28 primary will test that thesis again.

The Apartment Angle Makes This Worse

The entire point of Axon’s political operation is to protect its residential development plan. A city council compromise brokered by Mayor Lisa Borowsky cut the original proposal of nearly 1,900 units down to 1,200 apartment and condo units. That deal is still under legal challenge, with TAAAZE arguing the city’s MOU with Axon bypassed required public hearings and granted Axon new exemptions, including relief from water storage requirements.

Critics have also noted there are already roughly 10,000 apartments under construction or approved within five miles of the Axon site, raising real questions about whether those units ever generate the returns Axon is counting on. If the apartments never get built, or get tied up in litigation for years, Axon will have spent over a million dollars in local political campaigns for nothing. The reputational cost of being seen as a corporation trying to buy a city council could follow the brand long after the ballots are counted.

Axon Rendering

The Math Does Not Favor This Strategy

A stock down nearly 30 percent. A president selling millions in shares. Ongoing litigation over the very development the political spending is meant to protect. Legal exposure from aggressive PAC activity. And a track record in Scottsdale that shows outside money often backfires.

Axon makes exceptional products. But its leaders appear to be making a poor bet: that attempting to dominate a local council race is worth the scrutiny, the spending, and the shareholder risk that comes with it. Scottsdale voters have long memories. So do institutional investors.