BOSTON, Nov. 18, 2013 /PRNewswire/ -- Block & Leviton LLP (blockesq.com), a Boston-based law firm representing investors nationwide, is investigating possible securities law violations involving Tile Shop Holdings, Inc. ("Tile Shop" or the "Company") (NASDAQ: TTS).
The investigation is related to recent allegations that Tile Shop has exerted control over its primary supplier in order to manipulate the Company's inventory levels, and thereby, its financial results. Specifically, Gotham City Research LLC issued a report on November 14, 2013, which alleged, among other things, that the Company's largest supplier, Beijing Pingxiu ("BP"), is an undisclosed related company secretly controlled by Fumitake Nishi, the brother-in-law of the Company's CEO and a Tile Shop employee; that Tile Shop uses BP to overstate inventories, understate cost of sales and overstate gross profits; that BP sells goods to Tile Shop at or near cost to allow the Company to achieve an artificial cost advantage; and that Tile Shop's 2013 earnings are overstated by more than 200%. Much like the recent allegations made against NQ Mobile Inc., it appears that Chinese affiliates of a company under investigation, in this case BP, do not hold the physical presence claimed, and may exist largely on paper in order to facilitate the parent company's potentially fraudulent acts. In the aftermath of the release of the Gotham City Report, shares of Tile Shop dropped by $8.23 per share, a loss of approximately 39 percent of the Company's value.
Block & Leviton's investigation seeks to determine, among other things, whether Tile Shop or its officers and directors have violated the Securities Exchange Act of 1934 or any other federal securities laws. If you have any information relevant to this investigation, or if you purchased Tile Shop common stock, bonds or options prior to November 14, 2013, and have questions about your legal rights, please contact Steven Harte at 617-398-5600 or via email at Steven@blockesq.com.
Block & Leviton particularly encourages any whistleblowers, former employees or other individuals with knowledge of Company's practices to contact them in furtherance of their investigation.