What To Make Of Lumber Liquidators — Should We Believe Anderson Cooper and Whitney Tilson?

60 Minutes' Anderson Cooper with Lumber Liquidators founder Tom Sullivan. Source: 60 Minutes.

Back in late 2013, flooring retailer Lumber Liquidators was the classic American success story. Founder and Chairman Tom Sullivan had taken the business from one location and turned it into the country's largest retailer of wood and wood laminate flooring in about 20 years. Investors who bought shares after the IPO in late 2007 saw 10-fold returns by November of that year:

LL data by YCharts.

Since then the company has faced a Department of Justice investigation into illegal wood sourcing activity, a weak housing market that has seriously affected sales, and now a report from 60 Minutes , in which Anderson Cooper accuses the company of selling laminate flooring that is not only illegal in California but could put people's health at risk.

Denny Larson & Richard Drury are suing Lumber Liquidators. Short-sellers are funding their efforts. Source: 60 Minutes broadcast.

The story came to 60 Minutes by way of hedge fund manager Whitney Tilson, a well-known investor with a short position in Lumber Liquidators stock. Furthermore, as was disclosed in the story, short-sellers are funding at least one lawsuit against the company.

Since the peak in 2013, Lumber Liquidators stock has been hammered by almost 70% as of this writing, and many recent investors are paying a heavy price in losses. The question on many investors' minds today: Who's right? Is the company sourcing and selling an illegal product -- and, maybe more important, a potentially dangerous one?

This is a worthy and important question, but there's one that's just as important: How much is the company exposed right now? Furthermore, what's the actual risk that this creates for the company? Let's take a deeper dive into the allegations and, more specifically, into just how big a part of Lumber Liquidators' business is driven by the products alleged to be illegal and potentially harmful to consumers.

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What To Make Of Lumber Liquidators -- Should We Believe Anderson Cooper and Whitney Tilson?