Shares of Mattel Inc . (NASDAQ:MAT) rose over 4% in premarket trading Friday after the Wall Street Journal reported an activist investor has set sights on the toy maker in a bid to make changes that would boost its troubled stock.
Accordingly, Barington Capital has built an undisclosed stake in MAT, which closed at $18.27 on Thursday. The stock has seen minimal growth over the years amid challenges such as appealing to consumers during periods of high inflation and a declining toy market due to the rising popularity of video games and smartphone applications among children.
As such, Barington believes that without significant changes, Mattel's stock is likely to continue its lackluster performance. The activist investor suggests several actions for the toy manufacturer, including exploring strategic options for its Fisher-Price and American Girl brands, reducing its reliance on stock-based compensation, and initiating a $2 billion stock repurchase program.
In a letter sent to Mattel CEO Ynon Kreiz, Barington Capital's founder said that the proposed measures, coupled with ongoing improvements in Mattel's main fashion-doll and toy-vehicle sectors, could potentially more than double the company's stock price within three years, the WSJ report says.
Furthermore, the investment firm is advocating for Mattel to divide the roles of CEO and chairman, positions currently both occupied by Kreiz, who took on the CEO role in April 2018 and was named chairman shortly after.
However, it remains uncertain whether Barington's efforts will gain traction.