Southwest Airlines has implemented a shareholder rights plan, also known as a "poison pill," in response to activist investor Elliott Management's efforts to remove CEO Bob Jordan and Chairman Gary Kelly. The plan will be activated if Elliott or another investor acquires at least 12.5% of the company, allowing other shareholders to purchase new Southwest shares at a 50% discount. This move follows Elliott's disclosure of a $1.9 billion stake, representing about 11% of Southwest, and its call for leadership changes due to the airline's underperformance compared to its competitors. Southwest's adoption of the poison pill was partly prompted by Elliott's filings with antitrust authorities, indicating a potential increase in its stake. The airline expressed willingness to engage with Elliott for value creation and met with the firm recently. The poison pill aims to dilute Elliott's influence and is a common defense strategy against activist threats. Southwest's decision comes after pressure from Elliott, which sent a letter to the board in June outlining recommendations for board enhancement, leadership upgrade, and a business review. The rights plan is effective immediately and will expire in a year, applying to all current and future shareholders. This move reflects Southwest's efforts to protect itself from potential takeover attempts and maintain its financial performance and profitability. The stock market responded with a less than 1% increase in Southwest's shares following the announcement. Southwest's stock has experienced a 22% decrease in value over the past year. This development adds complexity to the battle for control over Southwest Airlines, as the company fortifies its defenses against a leadership overhaul.
