Lumber Liquidators (Toano, Va.) is not evil, wrote Whitney Tilson, a prominent hedge fund manager who on Monday removed his bet against the company's stock, causing its value to rise.
Lumber Liquidators (Toano, Va.) is not evil, wrote Whitney Tilson, a prominent hedge fund manager who on Monday removed his bet against the company's stock, causing its value to rise.
The stock surged from $14.06 to $17.53 by the end of the day Tuesday, but still remains far below its value at the start of the year. The stock was as high as $69.22 in February, before it plunged upon news that “60 Minutes” was investigating the company for formaldehyde levels in its Chinese-made laminate. The stock has hovered in the $13 to $20 range since July.
Tilson removed his stock bet because, as he wrote on financial blog Seeking Alpha, he received information that persuaded him the senior management at Lumber Liquidators was not aware the company was selling Chinese-made laminate with high levels of formaldehyde, as the explosive “60 Minutes” exposé alleged in March.
The company continued to sell Chinese-made laminate even after the investigation aired because it “genuinely believed the product was safe and compliant,” Tilson wrote.
While the new information doesn’t change Tilson’s belief that Lumber Liquidators was selling laminate with dangerous levels of formaldehyde, it did change the narrative Tilson was spinning about the company.
It went from a story of a company knowingly endangering its customers to save on sourcing costs to a story about a company “duped by Chinese suppliers and/or middlemen into believing it was receiving CARB2-compliant laminate,” he wrote.
“If so, Lumber Liquidators was sloppy and naïve, but not evil,” he wrote. “Many companies, alas, have unwittingly bought low-quality, toxic and/or illegal products from Chinese suppliers.”
