WHITNEY TILSON: Lumber Liquidators waiting to pull its controversial flooring is 'immoral, reckless and truly insane'
"60 Minutes" Whitney TilsonHedge fund manager Whitney Tilson thinks people are getting this Lumber Liquidators news wrong.
On Thursday morning, Lumber Liquidators announced that it will stop selling its laminate flooring sourced in China.
It did this as it reviews the practices of its suppliers and amid "mounting industry concerns," the company said.
Tilson, however, is short the company's stock, or betting that it will fall, and has been highly critical of management in the past.
Tilson flagged concerns about formaldehyde levels in Lumber Liquidators' flooring sourced from China back in October 2014, and CBS' "60 Minutes" interviewed him in their March 1 episode detailing problems at the company.
And so for Tilson, the decision to stop selling the flooring is too little, too late (emphasis added):
Rather than taking the obvious step of immediately suspending sales of the product in question, they, shockingly, did the opposite, slashing prices to dump this toxic product as quickly as possible on unsuspecting customers, all the while assuring them "all of our products are 100% safe."
This is one of the most immoral, reckless and truly insane decisions I have ever seen a company make.
Halting sales now - after selling thousands of American families tens of millions of dollars of toxic flooring in the 67 days since the 60 Minutes story aired - is too little, too late, as the damage has already been done.
Tilson also slammed the company's claim that 97% of samples results it has seen met regulatory standards.
In its earnings release, Lumber Liquidators said that over 100 class action lawsuits have been filed against Lumber Liquidators since March 1. The Department of Justice is seeking criminal charges against the company under the Lacey Act, related to its imported products. The Consumer Product Safety Commission is also testing the flooring.
On Thursday, the company also announced that former FBI Director Louis J. Freeh will "serve as an independent compliance advisor to the Company." The stock was up by about 2% in early afternoon trading.
"The stock should be down 20% on this announcement," Tilson wrote. "The fact that the market is totally misunderstanding what's going on here and driven the stock up on the day is a gift that I will gladly take, so I materially increased my short position this morning."