Exclusive-Elliott now owns enough Southwest Airlines to call a special meeting

By Svea Herbst-Bayliss

NEW YORK (Reuters) – Elliott Investment Management now owns 10 percent of Southwest Airlines common stock, surpassing the threshold that allows the hedge fund to call a special meeting at the carrier, according to a person familiar with the matter.

The news comes days before the two sides are scheduled to meet on Sept. 9 to discuss ways to resolve problems that have contributed to Southwest’s stock losing about half its value over the past three years.

The hedge fund, one of the world’s most powerful activist investors with $70 billion in assets under management, has called for CEO Robert Jordan and executive chairman Gary Kelly to be ousted. It also presented plans to nominate 10 executives to the airline’s 15-person board.

The hedge fund, which had taken an 11 percent economic stake through derivatives, converted enough of those stakes into common stock to break the 10 percent threshold. Its overall economic stake remains unchanged.

A Southwest representative was not immediately available for comment.

Jordan, Southwest’s chief executive since 2022, has said he will not resign and has signaled to staff that he and other executives are prepared to fight Elliott.

Elliott has signaled to other shareholders that it is ready to take the next steps, including calling a special meeting, unless the company is willing to discuss changes to its management.

A special meeting, used to request a shareholder vote on matters that cannot wait until the next annual meeting, are rare. And if Elliott were to call one, it would represent a major escalation in its battle with the carrier since its interest in the stock went public in June.

While the airline tried to repair its image and share price, it also took a defensive measure by implementing a shareholder rights plan that would make it difficult for an investor to accumulate more than 12.5% ​​of the shares .

Southwest announced plans to add seats with more legroom, moved to assigned seats and named a new board member in July.

Southwest’s share price lost 50 percent of its market value in the three years to June 7, when it closed at $27.75, just before Elliott’s investment in the airline was announced on June 10. It closed Friday at $28.92. The company’s value has fallen to $17 billion now, from $41 billion in 2017, according to Elliott research.

Elliott said the improvement measures come too late and offer too little.

Elliott has previously pushed for top executives to be ousted, including NRG CEO Mauricio Gutierrez, who insisted he would stay on only to step down late last year. NRG’s stock price is up about 160% since Elliott’s stake was disclosed in May 2023.

(Reporting by Svea Herbst-Bayliss; Editing by Stephen Coates)