Elliott Owns Enough Southwest Shares to Call Special Meeting

03.09.2024 - 16:45 / skift.com / Gary Kelly / Rakesh Gangwal / Bob Jordan / Elliott Management / Elliott Investment Management / Meghna Maharishi

Elliott Investment Management now owns 10% of common stock in Southwest Airlines, crossing the threshold to hold a special meeting.

A series of regulatory filings posted Tuesday morning showed that the activist investor managed to convert 10% of its economic stake in Southwest into common stock. Elliott still retains an overall 11% economic stake in the airline. 

Special meetings are rare and are typically used to request shareholder votes on issues that cannot wait until the next general meeting. Elliott could use a special meeting to force a vote on whether to oust Southwest CEO Bob Jordan and chairman Gary Kelly, which is something the hedge fund has been advocating for ever since its stake in the carrier went public in June.

Elliott is slated to meet with Southwest representatives on September 9. 

“We remain prepared to meet with Elliott next week and look forward to sharing details on our continued transformation at our Investor Day on September 26,” a Southwest spokesperson said in a statement. 

The hedge fund declined to comment on the filings. 

Elliott has been preparing for a potential proxy fight with Southwest. The hedge fund recently published a list of 10 candidates it intends to nominate to Southwest’s 15-person board. 

Southwest adopted a “poison pill” strategy and nominated IndiGo co-founder Rakesh Gangwal to its board of directors in an attempt to fend off Elliott from acquiring a larger stake in the company. Jordan said in a call with analysts July 25 that Elliott has not meaningfully engaged with Southwest. He also told reporters in June that he had no plans to resign. 

Elliott said it wants a leadership change at Southwest partly because the carrier’s stock has lost 50% of its market value in the last three years. This past year, Southwest has dealt with declining profits partly due to changing consumer preferences. 

Southwest plans to roll out premium seating and operate red-eye flights in a bid to turn around its fortunes. However, those changes may not be enough to avoid a boardroom battle with Elliott. 

Elliott said these changes came “more than a decade late.”

“This new plan is being proposed by the same leadership team that has presided over a series of failed measures to improve performance, repeated operational missteps and poor financial results,” the hedge fund said in a statement July 25. 

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