Southwest and Elliott:
Brutal Activism — June 2024

For the CEO of a publicly quoted company, it’s an unpleasant experience to find out that an activist investor has taken a substantial stake in your company. When the activist investor turns out to be Paul Singer’s Elliott Management, their day is really ruined.

This is what has happened on June 14 to Southwest’s CEO, Bob Jordan, who received a letter from Elliott stating that his airline had developed an “insular culture” and delivered “unacceptable financial and operational performance quarter after quarter”. Elliott had built up a holding of about $1.9bn in Southwest, equivalent to 11% of the airline’s market capitalisation of just over $17bn. Elliott claimed in the letter that the share price of a radically reformed Southwest, with a new top management team, would increase by 80% within the next year, bringing the market capitalisation up to about $31bn.