US hedge fund Elliott Investment Management LP has reportedly secured a 10% stake in Southwest Airlines Co.’s common shares, granting the firm authority to hold a special meeting with the Texas-based carrier’s shareholders and potentially marking an escalation of their corporate dispute.
People with knowledge of the matter said the activist investor was able to convert enough of its 11% derivative economic holdings in the airline company into common stocks to hit past the critical 10% ownership mark. Its overall economic stake was retained.
The operator of low-cost aircraft models has yet to comment on the matter.
The news came ahead of the meeting between the two companies on September 9, where discussions are expected to focus on the challenges that had battered Southwest’s stock value in the last three years.
In June, New York-based Elliott declared a $2 billion stake in the airline, which it urged to undergo a business evaluation. The investment manager with the $70 billion assets under management (AUM) also estimated that the carrier’s stock could reach $49 per share.
Southwest Further Pushed to Discuss Leadership Change
The reported development adds pressure to Southwest to willingly entertain talks of a major leadership change or attend a special meeting with shareholders.
The conflict between the two, which had been made public three months earlier, has intensified with the hedge fund’s call for the resignation of Southwest Chief Executive Robert Jordan and Executive Chairman Gary Kelly.
Jordan said he had no plans to vacate the position he was appointed to in February 2022. He signaled that he and other executives were ready to take on the activist investor.
In August, the firm also announced its plans to present ten nominees for the carrier’s board, which currently comprises 15 members.
Special meetings occur only to address important matters outside the annual general meeting (AGM). Such an event would only significantly escalate the ongoing dispute should Elliott decide to hold one.
The investment management company has previously indicated that it is prepared to take necessary action, such as a special meeting, if the airline remains resolute about not discussing changing its leadership.
