Taser's Stunning Rebound

As if it had been hit by its own stun gun, Taser International (Nasdaq: TASR) saw its shares plummet after a string of bad news.

Problems included dubious stock option sales by former director and former nominee for Homeland Security secretary Bernard Kerik, stock dumping by insiders, an SEC inquiry, and a questionable sale to a distributor. Add in a retaliatory lawsuit by competitor Stinger Systems for slander, and there's little wonder the stock lost more than 56% in less than two weeks. Even my colleague Seth Jayson took the company to task the other day, scolding it for a litany of perceived transgressions.

Yet recovering from the shocking treatment, the stock has risen almost 40% over the past two days, following positive developments including a Florida grand jury endorsing the use of Tasers and a medical journal saying stun guns are not dangerous to normal cardiac functions.

At the heart of the SEC investigation are Taser's claims that its product is safe. The company has said that no autopsy report has ever cited Taser as the cause of death and that no one has been seriously injured by its product. But apparently two newspapers have found 11 medical examiner reports that say the stun gun was the cause of, or at least a contributor in, those deaths. Taser's problem is that it didn't start collecting such reports until April of last year, though it has been making the claim for much longer. And while Taser points out that more than 100,000 police officers have been shocked during training with the less-than-lethal weapon, one newspaper apparently found several officers who suffered career-ending injuries. Amnesty International has called for a moratorium on the use of stun guns until their safety can be verified.

Tasers shoot two electric probes at a suspect, delivering 50,000 volts of electricity to incapacitate him. They are effective up to 21 feet away. Interestingly, that is the same minimum distance police officers are trained to maintain when someone has an edged weapon. Anything closer, and the officer is in danger of being cut and seriously injured, if not killed.

The Miami-Dade grand jury that endorsed the use of Tasers found them to be a safe alternative for law enforcement officers to use when confronted with dangerous or mentally ill subjects. Florida is one of two states that have seen deaths from police shootings drop to zero since the use of Tasers began.

And according to the Pacing and Clinical Electrophysiology Journal, stun guns -- what it calls neuromuscular incapacitation devices -- are not dangerous. In a study of the stun guns, it found that even though the likelihood that ventricular fibrillation (in which death is caused by failure of the heart to eject blood from the ventricle) was possible, no report has found that Tasers or similar devices ever actually caused it. The study also said stun guns have an "extraordinarily wide safety margin." Moreover, the Department of Defense has reiterated its initial Air Force report that found Tasers to be generally safe.

Of course, a viable product does not preclude the existence of shady dealings. It may still come out that Tasers have actually caused a handful of deaths or injuries. Nothing is 100% safe. It's up to investors to decide whether such safety claims are legitimate hyperbole or an attempt to deceive them.

Taser is a Motley Fool Rule Breakers recommendation.

Want to read more about Taser? Try:

• Taser's Unwanted Buzz
• Taser Shocks Stinger
• Taser in the Crosshairs

Fool contributor Rich Duprey was stunned to learn that doughnuts are fattening. He does not own any of the stocks mentioned in this article.