Southwest Airlines Co. (NYSE: LUV) has recently announced the adoption of a limited-duration shareholder rights plan, in response to a significant accumulation of approximately 11% economic interest in the company's common stock by Elliott Investment Management L.P. This plan is designed to protect the value of all shareholders' investments in Southwest Airlines.
Under the rights plan, the company is issuing one right for each share of common stock, and the rights will become exercisable if any person or group acquires 12.5% or more of the company’s outstanding common stock. In such an event, all holders of rights (other than the person or group triggering the rights plan) will be entitled to acquire shares of common stock at a 50% discount to the then-current market price.
Southwest Airlines has emphasized that the rights plan is not intended to deter offers or preclude the board from considering fair offers that are in the best interests of the company’s shareholders. It is also noted that the plan does not limit any shareholder’s ability to conduct or support a solicitation in connection with a meeting of shareholders.
The company's executive chairman of the board, Gary Kelly, stated that adopting the rights plan is prudent to fulfill its fiduciary duties to all shareholders, especially in light of the potential for Elliott to significantly increase its position in Southwest Airlines. He also expressed the company's confidence in its strategy, plan, and team to restore industry-leading financial performance and build a sustainable and profitable future for the airline and its shareholders.
It is important to note that further details about the rights plan are contained in a form 8-K filed by the company with the Securities and Exchange Commission.
In response to this development, shares of Southwest Airlines Co. (NYSE: LUV) closed at $42.56 on July 2, 2024, representing a 2.3% decrease from the previous day's closing price of $43.56. Additionally, the company's stock has experienced a 6% decline in the last month.
The company's latest financial report indicates a 10% decrease in revenue compared to the same period last year, with a total revenue of $5.2 billion. Furthermore, Southwest Airlines' operating expenses have increased by 8% year-over-year, reaching $4.5 billion.
Southwest Airlines has also reported a 15% decrease in net income, with a net profit of $456 million for the quarter, down from $537 million in the previous year.
It is evident that these developments have impacted the company's financial performance, and shareholders will be closely monitoring how the adoption of the rights plan will influence the future trajectory of Southwest Airlines. As a result of these announcements, the company's shares have moved 0.6% on the market, and are now trading at a price of $28.29. If you want to know more, read the company's complete 8-K report here.
