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Lumber Liquidators Stock Plunges As Senator Calls For Federal Probe

formaldehyde flooring

After a “60 Minutes” on Sunday night, shares of Lumber Liquidators fell over 20%. By Wednesday, shares of the flooring giant were down over 30% since Friday’s close as a senator pushes for a federal probe.

The CBS News program “60 Minutes” aired a special on Sunday saying that some of the laminate wood sold at Lumber Liquidators contained levels of formaldehyde, a carcinogen, in potentially harmful levels that exceeded California health and safety codes. The flooring was produced in factories in China and mislabeled as having passed testing, the report said.

By Monday morning, investors were rushing to dump their stock. Shares had fallen over 30% on Wednesday, although the stock did rally on Tuesday after an analyst upgraded the stock, saying the negative attention would likely blow over. Market Watch reported on a note that analyst David Strasser sent to clients pointing out that the report had no feedback from regulators, no complaints from consumers, and it used anonymous accusations from workers in a Chinese factory.

On Wednesday, Senator Bill Nelson (D-Florida) asked the heads of the Consumer Product Safety Commission (CPSC), Federal Trade Commission (FTC) and Centers for Disease Control and Prevention (CDC) to test the laminate flooring highlighted on the “60 Minutes” report.

[quote text_size=”small” author=”– Elliot F. Kaye” author_title=”Chairman of the Consumer Product Safety Commission”]

For consumers with potentially affected wood flooring, it makes no difference to them which federal agency does what. All that matters is that the government uses its resources and authorities to try to answer this fundamental question: Is the affected flooring in homes safe or not?


Lumber Liquidators has updated its website to dispute the “60 Minutes” findings, saying the show used an “improper test method” and it stands behind all of its products. The company also said the allegations against its products were pushed by short sellers, or investors who bet that a company is overvalued and its stock will drop in price.

Whitney Tilson, a hedge fund manager, told the New York Times that he became suspicious of Lumber Liquidators when shares more than doubled in one year. Tilson said he shorted the stock and paid $5,000 to purchase and test three pieces of wood and found that the formaldehyde levels were two to six times the legal limits in California.

Formaldehyde is associated with an increased risk for many types of cancer, including leukemia, but the United States has not yet enforced any federal safety standard to restrict its use in many wood products. California became a pioneer by setting its own standard that the Environmental Protection Agency adopted four years ago.

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