Nov 14 Shares of Tile Shop Holdings Inc
plunged 46 percent after short seller Gotham City Research
alleged that the stone tile retailer's gross margins were
Gotham City Research said in a report on Thursday that Tile
Shop used captive suppliers such as Beijing Pingxiu to overstate
inventories, understate cost of sales and overstate gross
The short seller claimed that Beijing Pingxiu was run by
Fumitake Nishi, who it said was the brother-in-law of Tile Shop
Chief Executive Robert Rucker.
Tile Shop, later in the day, suspended its relationship with
Beijing Pingxiu, saying it was not aware of ownership changes at
the supplier. The company denied misreporting financial
The Gotham City report said that Beijing Pingxiu, Tile
Shop's largest supplier, sold to the retailer at zero cost,
allowing the company to achieve higher gross margins.
Tile Shop shares were halted at $12.95 on the Nasdaq ahead
of the company's statement and did not resume trading before
close. The shares recouped some of their losses after the bell
to trade at $14.05.
About $400 million of the company's market value was wiped
out during regular trading. The shares had risen 55 percent over
the last year.
Gotham City said it did not value the company's shares at
more than $1.54-$3.34 per share.
(Reporting by Mridhula Raghavan in Bangalore; Editing by Sriraj