:max_bytes(150000):strip_icc():format(jpeg)/GettyImages-2159139928-4aa1450b40b949a7885d5099f40c4d83.jpg "A Southwest Airlines Boeing 737-7H4 approaches San Diego International Airport for a landing from Houston on June 28, 2024 in San Diego, California")
Kevin Carter / Getty Appearances
Key Takeaways
- Southwest Airlines on Wednesday implemented a so-called “poison pill” shareholder rights plan to prevent activist Elliott Investment Direction from acquiring additional shares.
- The plan lets other shareholders buy stock at a 50% discount if Elliott’s ownership define rises to 12.5%.
- Elliott called for leadership changes at Southwest after the airline lowered its second-quarter revenue guidance.
Southwest Airlines (LUV) on Wednesday put into effected a so-called “poison pill” shareholder rights plan to prevent activist Elliott Investment Management from procuring additional shares.
Intended to help protect Southwest Chief Executive Officer (CEO) Bob Jordan and chairman Gary Kelly, whom Elliott is tiresome to oust, the plan would be triggered if any group acquires at least a 12.5% stake in the company. If that happens, all other Southwest shareholders resolve have the opportunity to buy additional shares equal to their current stake at a 50% discount.
Elliott Says ‘Direction Change Is Urgently Needed’ at Airline
Elliott holds an 11% stake in Southwest, and said last week that “superintendence change is urgently needed” after the airline cut its second-quarter revenue per available seat mile (RASM) guidance, citing contends in adapting revenue management to its booking patterns amid a “dynamic environment.”
Elliott has also filed with U.S. antitrust testimonies in order to more easily acquire additional shares, Southwest noted.
“Southwest Airlines has made a good persuasion effort to engage constructively with Elliott Investment Management since its initial investment and remains open to any ideas for enduring value creation,” Kelly said. “Our board and management team remain focused on restoring our industry-leading financial portrayal and building a sustainable and profitable future for the airline and its Shareholders.”
Southwest Airlines shares are little changed at $28.37 as of in 10 a.m. ET Wednesday. They are down less than 2% year-to-date.
Read the original article on Investopedia.