Lumber Liquidators Holdings Inc (NYSE:LL) Stock Price Manipulation Grounds for SEC investigation
Equity Logic, LLC has notified the SEC of potential short seller manipulation in shares of Lumber Liquidators Holdings Inc (NYSE:LL), stemming from articles written last Friday.
On Friday a pronounced short seller took a pot shot at Lumber Liquidators (LL) and that caused the stock to decline by about 5%. Specifically, this manipulation, as I see it, came in the form of a 1-2 punch. Please understand that I have not proven manipulation, but my case is strong and I believe the SEC will see it the same way (they have in the past).
Here is what happened:
First, Valuewalk, acting either in coordination with or as Max Vision, issued a statement at 9:45 AM on Friday, 5.29.15, suggesting that they had damning evidence about Lumber Liquidators. This was not the article, but a statement suggesting an article would come, which is usually evidence of manipulative practices. This had everyone on the edge of their seats on Friday and drew tremendous attention to Valuewalk. New Internal Documents From Lumber Liquidators To Be Published Today
About 1.25 hours later Seeking Alpha published an article by Max Vision, which was either copied or used by ValueWalk, they may even be the same company, and the article cited internal company documents that seemed to prove a cover up was happening and that suggested that LL would face substantial additional costs related to engineered hardwood. They showed unreadable screenshots to support their claims. New Company Documents Reveal 'A Problem' With Engineered Hardwood At Lumber Liquidators
Additionally, that article pointed out that Lumber Liquidators usually takes a very long time to rebut articles like this, so it also suggested shorting and buying puts because, as they saw it, LL would be slow to react. This is also typically indicative of manipulation.
The authors of that article were all short before the article was published, as noted in their disclosure statements in the Seeking Alpha article.
Almost immediately, Valuewalk, which may indeed be the same company as Max Vision, published the article they referenced in their 9:45 AM lead: New Company Documents Reveal ‘A Problem’ With Engineered Hardwood At Lumber Liquidators
I do not have a problem with short sellers, but I have a big problem with manipulation.
On Friday, after the stock was down, I contacted Tom Sullivan, the President of Lumber Liquidators, and received (after the market was closed) the statement they filed with the SEC today (before the market opened). That statement was formal, filed with the SEC, and it rebuffed the speculative claims in the short seller's article.
However, this brings up a few important points. First, companies that have recently had negative news and who are slow to react to manipulative articles like the one issued on Friday are prone to declines like the one LL experienced on Friday, but that does not sit well with me.
I find value in shares of LL at this price, I have issued a strong buy recommendation (@ $21) based on valuation, and I maintain that position.
In addition, and as a direct result of what I saw happen on Friday, I will be proactive in my communication with the President of LL and help to protect shareholder value at these levels by alerting them to manipulative articles quickly so they can react swiftly as opposed to as slow as they have before.
If there is one thing that I have learned over the past 30 years in this business, if short sellers know a company is ready to protect its stock and therefore prepared to defend conjecture like what we saw on Friday short sellers lose their ability to manipulate.
My comments here suggest that there is value in LL, but the primary focus of this article is about the manipulation that I perceive to have happened and the proactive stance I have taken to not only alert the President of Lumber liquidators, but the SEC too, and my intent to do so every time a manipulative piece surfaces.
If there is negative news, I can accept that, but manipulation like what we saw on Friday deserves an SEC inquiry.