Southwest Airlines (LUV) is bracing for a proxy fight with activist investor Elliott Investment Management, according to media reports. This has sparked a choppy session for its shares Wednesday.
Elliott announced plans to nominate 10 directors to Southwest's 15-member board in a bid to reshape the company's leadership, according to The Wall Street Journal. Among the proposed nominees are David Cush, former CEO of Virgin America, and former federal transportation regulator Sarah Feinberg. Elliott has also been calling for the replacement of Southwest CEO Bob Jordan and the removal of Executive Chairman Gary Kelly, the WSJ said.
"The strong qualifications of these Candidates stand in contrast to those of the current Board, which prior to Elliott's June 10 letter lacked a single independent director with airline experience," said Elliott in a statement.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
To allow for a shareholder vote on its proposed directors, the investment firm is planning to call a special meeting, which it can do considering it has an 11% stake in the discount air carrier. According to Southwest's bylaws, a stakeholder must own 10% of the company in order to schedule a special meeting.
Southwest responded to the proxy fight news by stating that its board had attempted to engage constructively with Elliott, but the activist investor "dismissed those efforts at every turn," the WSJ said. Despite this, the airline remains open to discussions and will evaluate Elliott's board nominees, it added.
Elliott unveiled a roughly $2 billion stake in LUV in early June and said it would push for changes to reverse the airline's recent underperformance. Shortly after, Southwest adopted a "poison pill," which goes into effect after a shareholder accumulates a stake greater than 12.5%.
Is Southwest stock a buy, sell or hold?
Analysts have mixed feelings on the industrial stock. According to S&P Global Market Intelligence, the consensus analyst target price for LUV stock is $25.32, which is right around where shares are trading at the time of this writing. Meanwhile, the consensus recommendation is Hold.
Financial services firm Jefferies is more bearish than the consensus, as evidenced by its Underperform (equivalent to a Sell) rating and $20 price target on LUV stock.
"Although Elliott is likely able to convene a special meeting of the LUV board of Directors, we are doubtful that the 10 proposed (still unconfirmed) board members would be supported by the current shareholder base," said Jefferies analyst Sheila Kahyaoglu in an August 13 note. "We expect investors are unlikely to vote out the current leadership without entertaining a go-forward plan, particularly as LUV's recent actions have shown a growing willingness to adapt in ways that challenge Elliott's 'stagnant' characterization."
Jefferies $20 price target sits more than 20% where Southwest is currently trading.
Related Content
-
Quiz: How Much Do You Know About Taxes on Social Security Benefits?Quiz Social Security benefits often come with confusing IRS tax rules that can trip up financially savvy retirees and near-retirees.
-
Are You Ready for 65? The Medicare Initial Enrollment Period QuizQuiz Turning 65 soon? Test your basic knowledge of Medicare's Initial Enrollment Period (IEP) rules in our quick quiz.
-
3 Ways to Stretch the 2026 Social Security COLA For Your BudgetThree steps retirees can take to stretch the Social Security COLA to fit their budgets.
-
Giving Tuesday Is Just the Start: An Expert Guide to Keeping Your Charitable Giving Momentum Going All YearInstead of treating charity like a year-end rush for tax breaks, consider using smart tools like DAFs and recurring grants for maximum impact all the year.
-
Uber Takes Aim at the Bottom Lines of Billboard Personal Injury LawyersUber has filed lawsuits and proposed a ballot initiative, in California, to curb settlements it claims are falsely inflated by some personal injury lawyers.
-
Dow Slides 427 Points to Open December: Stock Market TodayThe final month of 2025 begins on a negative note after stocks ended November with a startling rally.
-
A Financial Adviser's Health Journey Shows How the 'Pink Tax' Costs WomenFact: Women pay significantly more for health care over their lifetimes. But there are some things we can do to protect our health and our financial security.
-
I'm a Cross-Border Financial Adviser: 5 Things I Wish Americans Knew About Taxes Before Moving to PortugalMoving to Portugal might not be the clean financial break you expect due to U.S. tax obligations, foreign investment risks, lower investment yields and more.
-
What to Make of a Hot IPO MarketThis year's crop of initial public offerings could be even dicier than usual because of a skew toward tech and crypto.
-
How to Position Your Portfolio for Lower Interest RatesThe Federal Reserve is far from done with its rate-cutting regime. This is how investors can prepare.
-
Show of Hands: Who Hates Taxes? The Best Time to Plan for Them Is Right NowBy creating a tax plan, you can keep more of what you've earned and give less to Uncle Sam. Here's how you can follow the rules and pay only your fair share.
