Elliott now owns enough of the airline to trigger a special shareholder meeting
The hedge fund trying to shake things up at Southwest Airlines is a step closer to a showdown with the company’s management team. Reuters reports that Elliott Investment Management now has a true 10% stake in the company, enough to trigger a special shareholder meeting.
Though Elliott had previously announced that it had acquired an 11% “economic” stake in Southwest, much of that position was being held through derivatives. The Reuters report suggests those instruments have been converted to actual Southwest shares.
Elliott wants to install a new executive team and several new board members in order to conduct a strategic business review. Though Southwest has made several operational changes since the fund announced its intentions in June, including the retirement of its open-seating and boarding policies in order to use more traditional methods, Elliott says that it’s too little, too late.
“This is not how company leadership demonstrates confidence in its plans and establishes credibility with shareholders; it is how failed corporate leaders attempt to preserve their own jobs and perquisites, despite the wishes of the company’s constituents,” it said in a letter to other shareholders.
The hedge fund’s acquisition of such a large position falls short of the 12.5% stake that would trigger a so-called “poison pill” that would weaken its voting power by issuing stock to all the company’s other shareholders. Elliott has also criticized that move.
In a statement provided to Quartz, Southwest said: “We remain prepared to meet with Elliott next week and look forward to sharing details on our continued transformation at our Investor Day on Sept. 26.”
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