Elliott Investment Management has disclosed a 7% beneficial ownership in Southwest Airlines, according to a regulatory filing on Monday. This filing provides a breakdown of Elliott's holdings in the airline as it pushes for changes in management and seeks to improve the company's financial performance.
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Elliott's 7% beneficial ownership is comprised of 23.3 million common shares and 18.6 million physical derivative agreements, or physically settled swaps. In total, Elliott holds an approximately 11% economic interest in Southwest Airlines, which is made up of common stock and derivatives. This figure has remained unchanged since Elliott's stake in Southwest became public in June. The activist investor has reiterated its belief that Southwest Airlines is undervalued and that changes in management and the board are necessary to enhance the company's strategy and performance. Elliott is advocating for the replacement of CEO Bob Jordan, who has been in the role since 2022, and Executive Chairman Gary Kelly, who previously served as CEO for many years. The firm also seeks to overhaul the board with new directors.
In a new development, Elliott has expressed its intention to allow shareholders to vote on director candidates, whether at a special meeting or the annual meeting. This move could potentially lead to a boardroom challenge. At present, Elliott owns less than 10% of Southwest Airlines' common stock, but it has been rapidly accumulating common shares, as indicated in the filing. In response to Elliott's investment, Southwest Airlines has adopted a shareholder rights plan, commonly known as a "poison pill," which would be triggered if any single investor acquires 12.5% or more of the company's stock.
Elliott has met with CEO Bob Jordan and members of the board at the company's headquarters, as stated in the filing. The activist investor's push for changes at Southwest Airlines comes as the airline has faced challenges, including a recent incident that resulted in a significant drop in its share price.