Elliott Investment Management, a hedge fund managing $70 billion in assets, has made a significant move in its campaign to influence Southwest Airlines. The hedge fund has secured enough shares to call a special meeting at the airline, according to Reuters, citing a source familiar with the matter. This development comes just days before a scheduled meeting between Elliott and Southwest, aimed at addressing concerns that have led to a significant decline in the airline’s stock price over the past three years.
Elliott has been vocal about its dissatisfaction with Southwest’s leadership, demanding the removal of CEO Robert Jordan and Executive Chairman Gary Kelly. The hedge fund plans to nominate 10 directors to the airline’s 15-person board. While Elliott has converted enough derivatives into common shares to reach the 10% threshold needed to call a special meeting, its overall economic stake remains unchanged. Jordan has asserted that he will not resign and is prepared to challenge Elliott’s demands.
Special meetings, typically used for urgent matters requiring shareholder votes, are a rare occurrence. This move signifies a significant escalation in Elliott’s campaign since its interest in Southwest became public in June. While Southwest has attempted to improve its image and stock price through measures like adding seats with more legroom and transitioning to assigned seating, Elliott has criticized these efforts as insufficient. According to Elliott’s research, Southwest’s stock price has dropped significantly, from $41 billion in 2017 to $17 billion currently.
Elliott’s actions are part of a broader strategy to exert influence over its investments. The hedge fund has been active in various sectors, including online dating, e-commerce, and airlines. However, Elliott itself has been undergoing internal restructuring, leading to a significant exodus of senior employees. In July, Southwest implemented a “poison pill” strategy, a limited-duration shareholder rights plan, in response to Elliott’s growing influence. This strategy was enacted to counter Elliott’s 11% stake in the company.
The news of Elliott’s call for a special meeting comes as Southwest’s stock price has been on a slight upward trajectory. The stock closed at $28.92 on Monday, up 0.63%. However, it remains significantly lower than its peak value in 2017. This situation highlights the ongoing battle for control of Southwest Airlines, with Elliott’s aggressive tactics pushing for significant changes in the company’s leadership and direction.
