Business Insider reports that stocks owned by the largest retailer of specialty hardwood floors, Lumber Liquidators, dropped after Anderson Cooper gave an exposé via CBS television. The exposé was about the formaldehyde-high laminated flooring the company is selling in the market.
In Anderson Cooper's "60 Minutes" report recently, he revealed that there is a great amount of formaldehyde in the laminated flooring being sold in the market by Lumber Liquidators. These products were manufactured in China, states CBS.
Formaldehyde is actually present in laminated flooring because of the glue that is used in manufacturing them. However, it should only be in small amounts as it will be released in the air. Without proper ventilation, the gas will be inhaled by people and even pets. According to an expert interviewed by Cooper, if present in high amount, formaldehyde can cause respiratory problems and more adverse reactions in children.
From the data gathered by Cooper and his team, the formaldehyde concentration retained in the Lumber Liquidators flooring materials are quite higher than what's allowed by the California Air Resources Board (CARB).
To regulate formaldehyde concentrations, markings of CARB2 on hardwood flooring materials are used indicate that the finished products passed the necessary second phase or are CARB Phase 2-compliant. However, in Lumbers Liquidators case, the markings are allegedly falsified by the manufacturers.
The exposé outraged homeowners who felt cheated. CBS reports that homeowners who installed the laminated flooring materials ripped their floor naked than suffer health consequences.
Ironically, Lumber Liquidators almost always fills its ads with young, cheerful children and household pets playing and crawling on the floor. So what made them do it? It is actually "greed," Hedge Fund manager Whitney Tilson told Cooper in his interview.
The Founder and Chairman of Lumber Liquidators, Thomas D. Sullivan said the issue thrown at his company is just about "stocks." He says that he trusts his contact mills in China and they have told him that the products are CARB2-compliant, despite Cooper's findings.
The exposé on Lumber Liquidators selling of formaldehyde-high flooring and Sullivan's lack of foresight and credibility created a big drop on the company's stocks. Note that this is not the first time that Lumber Liquidators' reputation has been tainted. It was also accused of outsourcing illegal products in the past, as reported in CBS.
As noted by Business Insider, stocks have dropped more than 36% of its value. According to Tilson, he has increased his bet against Lumber Liquidators' shares, as reported by Bloomberg. He even related to Business Insider in his email that he has "significantly increased" his short position in Lumber Liquidators since the "60 Minutes" report.
Now, even lawmakers want to know more about it, with a federal investigation looming, according to CBS News in another report.
Jason Hall via Fool.com, asks, should we believe Cooper's Report and Whitney Tilson's statements? He says this issue boils down to credibility, explaining, "Do you trust a company that may have illegally sourced product in the past? Or do you trust a group that's being backed by people with a financial incentive to drive down the company's stock price? "