Rakesh Gangwal's $100M Bet on Southwest Airlines Amid Leadership Dispute

A substantial investment in the firm has been made by Rakesh Gangwal, a director of Southwest Airlines Co LUV, who has purchased 3.6 million shares, valued at more than $100 million. Elliott Investment Management, an activist investor, is putting increasing pressure on the company to make changes to its leadership. Check InterGlobe Aviation share price

What transpired?

According to Securities and Exchange Commission filings, Gangwal, a co-founder of InterGlobe Aviation, purchased the shares between September 30 and October 1 for a price per share ranging from $29 to $30.

Gangwal joined the board in July and was appointed at the same time as Elliott pushed for changes in strategy to improve financial performance. Southwest recently revealed that six additional directors and Executive Chairman Gary Kelly will be retiring from the board.

Elliott has insisted on more changes, including the firing of CEO Bob Jordan, but Gangwal told Reuters that changing the company's leadership further will not help shareholders.

"I think it would be counterproductive and not in the best interest of shareholders to change the top leadership and board structure beyond what has already been announced," stated Gangwal.

Why is this Important?

The backdrop to Gangwal’s investment is a time of intense scrutiny and criticism from Elliott Investment Management, which has been public about its discontent with Southwest’s management. In August, Elliott announced a 7% investment in the airline, lobbying for a management reform, including the resignation of CEO Jordan and Executive Chairman Kelly.

Elliott made 10 independent nominations for the board in a calculated attempt to change Southwest's leadership. This happened after Elliott, who promised a 77% stock return potential if improvements were made, lambasted the airline for its antiquated plans and subpar execution.

In the midst of these changes, Southwest Airlines signaled a commitment to shareholder value by announcing a fresh $2.5 billion share repurchase program.

Variations in the airline's shares have been seen by investors in response to these continuing dynamics in the boardroom.

Price Action: On Wednesday, Southwest Airlines' shares finished at $29.57, indicating a 1.04% decrease for the day. After hours trading saw a 2.19% increase in the stock. Benzinga Pro data shows that Southwest Airlines has increased by 3.83% so far this year.

To Summarize

Rakesh Gangwal, co-founder of InterGlobe Aviation and director of Southwest Airlines, has made a significant investment by purchasing 3.6 million shares of Southwest Airlines, worth over $100 million, between September 30 and October 1. This comes amidst growing pressure from activist investor Elliott Investment Management, which has been pushing for changes in Southwest's leadership. Although Elliott has been advocating for CEO Bob Jordan’s removal, Gangwal believes further leadership changes would be counterproductive. Elliott, which owns a 7% stake in the airline, has criticized Southwest's management and made independent nominations for the board. In response, Southwest has announced a $2.5 billion share repurchase program. Despite ongoing boardroom dynamics, Southwest’s stock has shown volatility, with a slight increase of 3.83% year-to-date.