What happened

Shares of Ammo (POWW 1.76%) are tumbling today, down by 10.8% as of 11:19 a.m. ET after the ammunition maker announced it intended to split into two separately traded companies.

Following a trend among other shooting sports companies, Ammo said it will spin off its marketplace business, with Chairman and CEO Fred Wagenhals assuming the same position at the new company. The leader of the existing ammunition business will be determined at a later time.

So what

It's no secret the firearms industry is a volatile one, and others in the space have also split their operations in two. Gunmaker Smith & Wesson Brands (SWBI 0.97%) spun off its outdoor gear business into American Outdoor Brands (AOUT -2.18%). Vista Outdoor (VSTO 1.13%) sold off its gun operations a few years ago, but recently announced it would separate its ammo business from its outdoor gear and accessories unit.

Last year, Ammo acquired the firearms marketplace Gunbroker.com, which allows for third-party sale and purchase of firearms. Ammo maintains that by calving off the business into a separate entity, investors will have the opportunity to benefit from the unique attributes of each business while allowing them to narrowly focus their capital expenditures on their own operations.

Now what

Firearms sales have slowed from the breakneck pace they were at during the onset of the pandemic. Both Smith & Wesson and Sturm, Ruger have reported significantly lower sales year over year.

Yet despite the drop, sales remain elevated over historic levels and 2022 is still on pace to be one of the biggest years for firearms sales since the FBI began tracking them in the late 1990s.

The ammunition industry, however, remains in the midst of a shortage because of the outsize demand. Coupled with supply chain issues, ammunition of various calibers is still difficult to find at retail.