This Is Why Shares of Lumber Liquidators Are Surging

March 22, 2016, 6:45 PM UTC
<> on April 29, 2015 in Cicero, Illinois.
Caption:CICERO, IL - APRIL 29: A sign marks the location of a Lumber Liquidators store on April 29, 2015 in Cicero, Illinois. The U.S. Department of Justice is reported to be seeking criminal charges against Lumber Liquidators following an investigation over imported products. The television news program ''60 Minutes'' recently reported that the company's Chinese-made laminate flooring products had unsafe levels of formaldehyde, a known carcinogen. (Photo by Scott Olson/Getty Images)
Photograph by Scott Olson — Getty Images

Shares of Lumber Liquidators (LL) rose nearly 16% Tuesday after the company said it paid $2.5 million to settle a claim that it had sold laminate flooring containing formaldehyde that exceeded California state limits.

As part of the settlement with the California Air Resource Board, Lumber Liquidators will implement a series of compliance procedures to make sure its products are up to CARB’s standards. They include regular audits on existing and new supplies of products, as well as random tests of certain samples.

“We believe today’s settlement will go a long way in helping us to execute our strategy, which includes rebuilding our brand and communicating—with clarity and candor—the value of our products to our customers and stakeholders,” Lumber Liquidators CEO John Presley said in a statement.

According to a Lumber Liquidators’ press release, CARB recognized that the company had cooperated with its investigation and did not appear to have harmed public health or safety.


Shares of Toano, Va.-based Lumber Liquidators have cratered 88% since their peak in November 2013, when prominent hedge funder Whitney Tilson shorted the stock. They continued their downward spiral after CBS’s 60 Minutes reported in March 2015 that some of Lumber Liquidators’ products contained cancer-causing formaldehyde. Earlier this year, the Centers for Disease Control and Prevention confirmed that the some of the company’s laminate flooring produced in China could cause cancer. That investigation is still ongoing.

Lumber Liquidators’ $2.5 million settlement has been deposited in the California Air Pollution Control Fund, according to CARB, “which provides funding for projects and research to improve California’s air quality.”

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