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Lumber Liquidators fires back after 25% drop

Lumber Liquidators (LL) lashed out at its critics on Monday after the company's stock lost a quarter of its value. That move followed a CBS report that the company sold flooring with higher levels of formaldehyde than permitted under California's health and safety standards. The stock fell more than 25 percent in Monday's trading after being halted from the opening bell until about 11:15 a.m. EST. A "60 Minutes" segment on Sunday said it tested Lumber Liquidators' flooring in Virginia, Florida, Texas, Illinois and New York for levels of formaldehyde, a cancer-causing chemical. "Out of the 31 samples of Chinese-made laminate flooring, only one was compliant with formaldehyde emissions standards. Some were more than 13x over the California limit," according to CBS.

Lumber Liquidators said in multiple statements throughout the day that it complies with applicable regulations regarding its products, including California standards for formaldehyde emissions. "These attacks are driven by a small group of short-selling investors who are working together for the sole purpose of making money by lowering our stock price," the company said in one statement.

Shares in the flooring retailer had also fallen on news of the impending report last week. All told, the stock lost about 43 percent over the last week.

The company sought to calm customers and investors, insisting that "our laminate floors are completely safe to use as intended." Lumber Liquidators said that it believes the CBS show used an "improper test method." The company added that it has documentation to support every step of its production process. The flooring retailer also alleged in a statement that its chairman had addressed the company's test methodology, but "60 Minutes" had chosen not to include that information. Whitney Tilson, the founder and managing partner of Kase Capital Management who originally brought the story to the CBS show, told CNBC that "Lumber Liquidators appears to have come up with its own testing protocol ... so they're the ones who are doing the bogus testing." Read More Lumber Liquidators stock fell ahead of CBS story The company fired back in a statement provided to CNBC after Tilson's Monday interview. "The testing methodology used by the media and short sellers has not been validated and does not measure a product as it is actually used by consumers." Lumber Liquidators' shares plunged as much as 24 percent last week after Chief Executive Robert Lynch said CBS's "60 minutes" news program would feature the company in an "unfavorable light with regard to sourcing and product quality, specifically related to laminates." Tilson told CNBC's "Fast Money: Halftime Report" he had actually tried to short more of the company after last week's move-he is already short 44,676 shares-but said he was unable to secure any more borrow. For his part, Tilson said he did not know if the company was "truly evil" for intentionally selling bad products, or if it was "just stunningly naive and incompetent." Calling his position a "perfect short," Tilson predicted that Lumber Liquidators will fall to zero, but admitted that he might consider taking some profits around $15 (the stock closed Monday near $39). But the company has vowed to fight back. "Short sellers like Mr. Tilson make a living on manufacturing doubt about publicly traded companies like Lumber Liquidators. In this case, Mr. Tilson has trumpeted the fact that he was the impetus behind '60 Minutes' running this story," the company said after Tilson's Monday interview. "Mr. Tilson is executing a well-established and profitable playbook: publicly speculate about a company's success and use a compliant media to execute on his strategy to drive down a company's valuation for his own personal gain," the statement continued. "These motives and methods are wrong, and we will fight these false attacks on all fronts." CORRECTION: This version corrected first reference to CBS.

-Reuters contributed to this story.

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