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Elliott Capital has acquired nearly a $2 billion stake in Southwest Airlines, seeking to replace top management and align the airline more closely with major competitors such as American Airlines and JetBlue by introducing charges for bags and basic economy fares. In response, Southwest Airlines has adopted a 'shareholder rights plan,' commonly known as a 'poison pill,' designed to make any takeover attempt prohibitively expensive, according to an SEC filing. This move is expected to lead to litigation.
The Southwest Airlines Board declared a dividend of one right (a “Right”) for each share of common stock outstanding as of July 15, 2024. This measure significantly dilutes the ownership of any person or group that acquires 12.5% or more of the company’s common stock without Board approval. Such persons or groups are termed "Acquiring Persons," and their Rights will become void.
Each Right entitles the holder to purchase one ten-thousandth of a share of common stock at a set price, subject to adjustments. Rights holders do not have shareholder rights (e.g., voting, dividends) until they exercise their Rights. The Rights become exercisable upon the earlier of:
