Lumber Liquidators Holdings Inc.'s (NYSE: LL) stock is taking another beating Monday. Its shares fell more than 20% to $11.23 Monday after a division of the Centers for Disease Control and Prevention said that some of the firm’s laminate flooring have greater risks of cancer associated with exposure to them than the agency had originally told the public.
It’s the latest blow to the company that seen its stock and sales battered by worries about the safety of its flooring and the exodus of several top executives last year. Earlier this month, the company said it would pay more than $13 million for illegally importing hard ward flooring. Lumber Liquidator’s stock is down 35% this year, 83% over the past 12 months and more than 90% from the company’s peak share price of $119.44 in November 2013.
On Feb. 10, investors in Lumber Liquidators breathed a sigh of relief after the CDC said in a report that the company’s laminate flooring contained levels of formaldehyde that could cause minor health issues, but posed little chance for increased cancer risk. It’s shares rose 3% after the report was released.
More than a week later the CDC has revised its findings. The organization said Monday it used the wrong calculations for ceiling height when it made its original recommendations. While it hasn’t released final results, it said the risk of cancer from exposure to some of Lumber Liquidators’ flooring is six to 30 cases per 100,000, up from the two to nine cases per 100,000 people it estimated in its Feb. 10 report.
Even though the CDC said the risk was increased, the agency said it’s unlikely to change it recommendation on how consumer should approach this flooring. The agency’s current recommendation is that consumers “strongly stress taking steps to reduce exposures, which should alleviate respiratory and eye, nose and throat irritation. These steps should also reduce the cancer risk.”
Last year “60 Minutes” reported that the flooring company was sourcing Chinese-produced laminate wood flooring that released high levels of formaldehyde, a colorless gas widely used in manufacturing building materials and household products. The news pummeled Lumber Liquidators shares, hurt sales and forced the company to defend its sourcing practices.
Even before the 60 Minutes report, the company, which had seen its shares jump more than 550% between the start of 2012 and November 2013, had attracted short-sellers. Hedge-fund manager Whitney Tilson, who runs Kase Capital Management, publicly questioned their sourcing practices in November 2013. While Mr. Tilson told the WSJ after the 60 Minutes report that he planned to stay in the stock till it went down to zero, he closed out his position in December. Mr. Tilson said Monday that he still has no position.
Still short interest in Lumber Liquidators has continued to rise since the beginning of 2016, and now stands around 34% up from 26% in early 2016, according to daily short-interest data provider Markit. That’s roughly 10 times the average short interest for companies in the S&P 500, according to Markit.