Lumber Liquidators stock hammered as formaldehyde scandal worsens
Post on: 16 Март, 2015 No Comment
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Investors are crying “Timber!” for Lumber Liquidators, as bad news cut through the share price like a buzz saw.
On Wednesday, a US senator urged three federal agencies to investigate whether the company’s Chinese-made laminate flooring contains potentially dangerous levels of formaldehyde. That sent the already-battered stock to fresh lows, closing down 12.6 percent, at $35.64, on the same day the company suddenly pulled out of an investment conference.
Lumber Liquidators’ stock was hammered by an explosive “60 Minutes” report Sunday night that claimed Chinese-made laminate flooring sold by the nation’s largest hardwood flooring retailer contained levels of formaldehyde, a carcinogen, that were above the standards set by California’s Air Resources Board.
The stock has been sawed almost in half since last Wednesday, when the company warned investors the TV report was coming.
Sen. Bill Nelson (D-Fla.) sent a letter to the heads of the Consumer Product Safety Commission, the Centers for Disease Control and Prevention and the Federal Trade Commission, asking for a probe.
Nelson, the leading Democrat on the Senate Committee on Commerce, Science and Transportation, called for independent testing of the product and said he wanted to know whether the company made potentially false marketing claims about the product’s compliance with California’s standard.
“Because this could affect millions of homeowners, it’s imperative we get some answers quickly,” Nelson said.
Employees at a Union Square Lumber Liquidators store The Post visited said they still stock the Chinese-made laminates but don’t tell customers where the product is made unless they ask.
One customer, who left with samples of hardwood around 3 p.m. said she wasn’t aware of the formaldehyde controversy. A male customer who was looking for Gorilla glue said he hadn’t heard about the controversy either.
But investors are certainly taking notice, as the stock was already one of the most heavily shorted names out there. Almost 30 percent of the shares had been shorted as of Feb. 15, the latest numbers available.
Lumber Liquidators also told investors last Wednesday that the Justice Department informed the company it may be filing criminal charges against the retailer for allegedly selling wood from a protected habitat of Siberian tigers in violation of federal law.
Also on Wednesday, the company backed out of the Raymond James Annual Institutional Investors Conference in Orlando, Fla. where its CEO and CFO were scheduled to speak.
“Lumber Liquidators shares Senator Bill Nelson’s desire for consumer safety,” the company said in a statement, striking a conciliatory tone. “Over the past few years, Lumber Liquidators has been actively engaged with the California Air Resources Board (CARB) and the Environmental Protection Agency (EPA), attending workshops, offering support and providing comments.”