In recent months, the battle for control of Dallas-based Southwest Airlines, (LUV) has been nothing more than worthy of a season of HBO's hit boardroom show “Succession.”
In its efforts to see current CEO Bob Jordan and most of the board ousted by what it classifies as “poor execution and leadership's stubborn unwillingness to evolve,” hedge fund Elliott Investment Management has bought enough shares of the company to be able to raise the issue. to a vote of shareholders. To prepare, it sent a letter asking shareholders to buy back their shares to make them eligible in a vote that could take place in the coming days.
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“If any of your shares are currently on loan, you can instruct your broker to take out the borrowed shares to ensure you are 'long' your entire eligible position,” wrote Elliott partner John Pike and portfolio manager , Bobby Xu, in a statement on September 24. letter addressed to shareholders. “Shareholders should be prepared for whatever record date the Southwest Board sets.”
Leadership change 'counterproductive': New player emerges in southwest proxy battle
The letter also accuses the airline of setting up “false registration dates” with banks and brokers to limit who will be registered to vote when the special shareholder meeting is suddenly called. The latest major update comes as Indian low-cost airline IndiGo co-founder and current Southwest board member Rakesh Gangwal also made the decision to buy more than $100 million worth of the airline's stock in an effort for stabilizing the stock amid the turmoil caused by Elliott's proxy battle. .
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Named to Southwest's board of directors in July 2024, Gangwal emerged as a last-minute ally of the airline's current leadership. It has now purchased 3.6 million shares valued at approximately $100 each.
“I believe that changing the board structure and senior leadership beyond what has already been announced would be counterproductive and not in the best interest of shareholders,” Gangwal said in a statement, referring to the fact that Southwest already responded to the Pressure from investors expelling the president. Gary Kelly and several current board members.
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All in the effort to own enough shares to be able to unbalance Elliott's control, Jordan and Kelly also bought or moved their personal shares in the airline. The filing the airline filed with the US Securities and Exchange Commission (SEC) shows that Jordan bought 97,872 shares valued at $29.63 each, while Kelly transferred 84,212 shares to a family trust and also bought directly 33,921 additional shares.
None of these purchases significantly alter control of the airline (after his purchase, Gangwal now owns about 0.6% of the company, while more than 10% is needed to call shareholder meetings), but their goal is to create the image of an airline that other investors have. putting your own money.
Elliott, in turn, has previously criticized Gangwal as someone who was “elected in part because of his support for the company's status quo plan and leadership” and called his actions in this regard “only solidifying the case for change.” of leadership”. “.
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