Southwest Airlines Stock Rises as Elliott Investment Management Gains Control

Key Takeaways

• Elliott Investment Management has acquired over 10% ownership of Southwest Airlines, allowing it to call a special meeting.
• The hedge fund has been critical of Southwest’s management and has nominated candidates for the airline’s board.
• Southwest has implemented a “poison pill” defense to prevent Elliott from gaining control without board consent.

Shares of Southwest Airlines (LUV) saw an increase on Tuesday after it was confirmed that hedge fund Elliott Investment Management now holds a significant stake in the company. Elliott’s ownership allows it to call a special meeting as it seeks to make changes within the airline.

In a regulatory filing, Elliott disclosed that it owns more than 61 million shares of Southwest, surpassing the 10% threshold required to demand a special meeting. This announcement follows Elliott’s previous statement on August 13, where it expressed its intention to nominate 10 members to Southwest’s board in an effort to improve the company’s stock price. At that time, Elliott held an approximately 11% stake in the airline.

Elliott’s Criticism of Southwest Executives

Elliott further criticized Southwest executives in an open letter to shareholders, outlining its framework for change. The letter specifically targeted Chief Executive Officer (CEO) Bob Jordan and former CEO, now Executive Chair, Gary Kelly for their failure to address the company’s needs.

Elliott plans to hold meetings with Southwest representatives on September 9, hoping to persuade board members who align with its position.

In response to Elliott’s efforts, Southwest adopted a one-year “poison pill” defense earlier this summer. The airline has expressed dissatisfaction with the activist investor’s lack of engagement with management regarding constructive changes.

Despite Southwest Airlines’ shares being relatively flat year-to-date, the stock experienced a 1.3% increase on Tuesday afternoon, reaching $29.29.

Overall, Elliott Investment Management’s acquisition of a significant stake in Southwest Airlines has sparked interest in the company’s future. The hedge fund’s efforts to nominate board members and implement changes have the potential to impact Southwest’s performance and stock price.

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