Mattel, Inc. Class Action Lawsuit
- Company Name
- Mattel, Inc.
- Stock Symbol
- Class Period
- October 26, 2017 to August 8, 2019
- Central District of California
On December 24, 2019, the Mattel, Inc. class action lawsuit was filed charging Mattel and its Chief Financial Officer (“CFO”) with violations of the Securities Exchange Act of 1934. The Mattel class action lawsuit was commenced in the Central District of California on behalf of purchasers of Mattel common stock between October 26, 2017 and August 8, 2019 (the “Class Period”) and is captioned Houston Municipal Employees Pension System v. Mattel, Inc., et al., No. 19-cv-10860.
Mattel is an international toy manufacturing company that claims to be the owner of one of the strongest portfolios of toy brands with vast intellectual property potential.
The Mattel class action lawsuit alleges that during the Class Period, defendants made false and misleading statements regarding Mattel’s financial results. Specifically, defendants failed to disclose that Mattel had engaged in certain improprieties with respect to its financial accounting during the last two quarters of 2017, and that there were weaknesses in its internal controls. As a result of this information being withheld from the market, the price of Mattel common stock was artificially inflated to a high of more than $18 per share during the Class Period.
Then on August 8, 2019, Mattel announced that its outside auditor had received a whistleblower letter alleging certain improprieties in Mattel’s accounting practices. As a result, Mattel suddenly terminated a $250 million offering of Senior Notes due 2027 that was scheduled to close that very day and that had been announced only a week before. As a result of this news, the price of Mattel common stock fell $2.12 per share, or almost 12%, in a single trading day.
Subsequently, on October 29, 2019, Mattel announced it had completed its investigation of the whistleblower claims and that its CFO would be leaving Mattel. Among other things, Mattel acknowledged that it had committed certain accounting “errors,” including understating a previously reported net loss by “$109 million due to an error in calculating its tax valuation.“ Mattel also announced that it would amend its 2018 Annual Report on Form 10-K to restate its last two quarters of 2017 and to identify material weaknesses in its internal control over financial reporting for those quarters. Then on November 6, 2019, The Wall Street Journal published an article reporting that Mattel and its auditor had obscured Mattel’s accounting issues. The article was based on information provided by Mattel’s former director of tax reporting, who confirmed that the third quarter 2017 accounting “error” had been intentionally hidden by Mattel’s financial executives. According to the article, the former executive stated that his “team was dumbfounded by [the cover-up, but] it was known within Mattel that if we took this approach, at worst we might get a slap on the wrist from the [U.S. Securities and Exchange Commission] . . . . But if the company disclosed a material weakness, a senior executive said to me it would be ‘the kiss of death.’”
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