Ahead of the scheduled meeting on Sept. 9, Elliott Investment Management has secured enough shares to call a special meeting at Southwest Airlines LUV.
What Happened: Elliott Investment now holds 10% of Southwest Airlines’ common stock, enabling the hedge fund to call a special meeting at the airline, reported Reuters, citing a person familiar with the matter.
The development comes just days before a scheduled meeting between the two parties to address issues that have led to Southwest’s stock losing about half its value over the past three years.
Elliott, managing $70 billion in assets, has demanded the removal of CEO Robert Jordan and Executive Chairman Gary Kelly, and plans to nominate 10 directors to the airline’s 15-person board.
Despite converting enough derivatives into common shares to cross the 10% threshold, Elliott’s overall economic stake remains unchanged. Jordan, who has been CEO since 2022, has stated he will not resign and is prepared to contest Elliott’s demands.
Elliott has indicated to other shareholders that it is ready to take further steps, including calling a special meeting, unless the company agrees to discuss leadership changes. Special meetings, used to solicit shareholder votes on urgent matters, are rare and would mark a significant escalation in Elliott’s campaign since its interest in Southwest became public in June.
Southwest has been attempting to improve its image and stock price by adding seats with more legroom, moving to assigned seating, and appointing a new board member in July.
However, according to the report Elliott has criticized these measures as too little, too late. Southwest’s stock price has dropped significantly, from $41 billion in 2017 to $17 billion now, according to Elliott’s research.
Southwest Airlines and Elliott did not immediately respond to Benzinga's request for comment.
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Why It Matters: This move by Elliott Investment Management is part of a broader strategy by the hedge fund to exert influence over its investments. Recently, Elliott has been active in various sectors, including online dating, e-commerce, and airlines. For instance, in August, Elliott raised its stakes in companies like Etsy Inc. and American Airlines Group Inc.
However, Elliott’s internal dynamics have reportedly been shifting. The hedge fund has undergone restructuring, leading to a significant exodus of senior employees. At least nine former staffers have launched their funds since 2021.
Southwest Airlines has also been proactive in defending itself against Elliott’s maneuvers. In July, the airline activated a “poison pill” strategy to counter Elliott’s growing influence. This limited-duration shareholder rights plan was implemented in response to Elliott’s 11% stake.
Price Action: Southwest Airlines closed at $28.92 on Monday, up 0.63%. Year to date, the stock has gained $0.44, marking a 1.54% increase, according to data from Benzinga Pro.
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Photo via Wikimedia Commons
This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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