By the World's Best Investment Manager and Financial Market's Journalist
Elliott Investment Management has now acquired a 10% stake in Southwest Airlines, allowing them to call a special meeting at the carrier. This move comes as the hedge fund aims to address issues that have led to a significant decline in Southwest's stock value over the past three years.
With $70 billion in assets under management, Elliott has demanded the ousting of CEO Robert Jordan and Executive Chairman Gary Kelly, along with plans to nominate 10 directors to the airline's board. The hedge fund's decision to convert enough derivative holdings into common shares to cross the 10% threshold marks a significant development in their campaign.
Southwest Airlines, currently facing challenges in both image repair and stock price recovery, has implemented defensive measures such as a shareholder rights plan to deter investors from accumulating more than 12.5% of the stock. While the airline has made efforts to improve its offerings, Elliott believes these measures are insufficient.
As Elliott prepares to take further steps, potentially calling a special meeting to escalate its fight with Southwest, investors are left wondering about the implications for their portfolios. Southwest's stock price closed at $28.92 on Friday, a slight increase from previous lows, but still significantly down from its peak in 2017.
Analysis: Elliott Investment Management's increased stake in Southwest Airlines signifies a growing conflict between the hedge fund and the carrier's management. The potential outcome of a special meeting could lead to significant changes in Southwest's leadership and strategy, impacting the company's future performance and investor sentiment.
