What happened

Shares of Callaway Golf (MODG -1.66%) have jumped today, up by 14% as of 11:20 a.m. EDT, after activist hedge fund Jana Partners disclosed a hefty stake in the maker of golf gear. The news comes as the U.S. Open kicks off.

So what

In a regulatory filing, Jana revealed that it has been scooping up stock in the open market over the past month or so and now holds nearly 8.7 million shares, or a 9.2% stake in Callaway Golf. The fund spent approximately $136.4 million after paying between $14.70 and $16.09 per share. Jana said that it purchased the shares because it considers them to be "undervalued and represent an attractive investment opportunity."

Man playing golf

Image source: Getty Images.

Jana has signed cooperation agreements with three seasoned consumer products executives who disclosed smaller positions: Roger Farah, Cindy Davis, and James Lillie. The fund says it may seek to propose new directors for the board. Jana had previously helped get both Farah and Lillie appointed to the board of Tiffany. Davis was the president of Nike Golf before retiring in 2014.

Now what

The fund argues that even as Callaway has enjoyed success in "driving innovation and durable market share gains in its core golf business, other factors have caused [it] to underperform and remain undervalued." Jana intends to engage with the board of directors and management team to explore ways to increase shareholder value, potentially including an outright sale of the company or asset divestitures, according to the filing.