Southwest Airlines Implements Defensive Strategy in Response to Investor Pressure from Elliott Management

Money | July 3, 2024, 4:44 p.m.

Southwest Airlines has implemented a "poison pill" provision to prevent activist investor Elliott Investment Management from gaining more influence over the company. With Elliott's stake at 11%, the shareholder plan aims to make it difficult for them to increase their influence. This move is common in thwarting perceived underperforming companies. The plan allows shareholders to buy more stock at a discount if another acquirer reaches a certain ownership threshold. This dilutes the acquirer's holdings, making it costly to gain control. Despite Elliott's plan to boost stock prices, Southwest remains open to value creation ideas. While Southwest has a unique business model, it faces pressure from Elliott to enhance board leadership and review business. The adoption of a similar plan by Twitter demonstrates the escalating tensions between companies and activist investors. Southwest's actions aim to protect shareholder interests as financial challenges persist.