Lumber Liquidators' troubles deepen as CEO abandons ship

Thu May 21, 2015 2:13pm EDT
 
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By Sagarika Jaisinghani and Ramkumar Iyer

(Reuters) - Lumber Liquidators Holdings Inc (LL.N: Quote) said Chief Executive Robert Lynch had unexpectedly resigned, nearly three months after a report alleged that the company sourced flooring laminates with harmful levels of a known carcinogen.

The company's shares fell 17 percent to $20.97, their lowest in 39 months, making it the biggest percentage loser on the New York Stock Exchange on Thursday.

Lumber Liquidators is facing several investigations and lawsuits after an episode of CBS's "60 Minutes" alleged in March that laminate products it sourced from China contained toxic levels of formaldehyde.

The company is also facing criminal charges resulting from a 2013 U.S. Department of Justice probe related to the import of some flooring products.

Whitney Tilson, whose hedge fund Kase Capital is shorting the stock, said Lynch's resignation likely meant that Lumber Liquidators was under immense pressure from regulators and that he expected them to take "decisive action" against the company.

"Lynch was likely under immense pressure from the board, saw the writing on the wall, and decided to jump before being pushed," he said.

Tilson said he was not increasing his short position on Lumber's stock but would keep it as his largest short.

Lynch's departure comes less than a month after Chief Financial Officer Daniel Terrell quit.   Continued...

 
A Lumber Liquidators retail store is shown in San Diego, California March 2, 2015. REUTERS/Mike Blake