In a recent regulatory filing, Elliott Investment Management revealed that it has a beneficial ownership of 7% in Southwest Airlines (NYSE:LUV).

What Happened: The 7% stake includes 23.3 million common shares and 18.6 million physical derivative agreements. This brings Elliott's total economic interest in Southwest, including common stock and derivatives, to approximately 11%, Reuters reported on Tuesday.

Elliott has been advocating for a management overhaul at Southwest, arguing that the airline is undervalued and requires a new strategy to enhance its performance. The firm is pushing for the replacement of CEO Bob Jordan and Executive Chairman Gary Kelly, and a refresh of the board with new directors.

Why It Matters: In June, Elliott had built a nearly $2 billion stake in Southwest and was planning to push for changes to enhance the airline's underperforming shares. A day later, Elliott sent a letter to Southwest's Board of Directors criticizing the company's outdated strategies and poor execution.

In response to Elliott's increasing stake, Southwest implemented a limited-duration shareholder rights plan, also known as a "poison pill," in July. The plan, which prevents a takeover if one investor acquires 12.5% or more of the stock, will last for one year, with any extension requiring shareholder approval.

Elliott's filing also hinted at its future plans. The firm reiterated its intention to propose potential board candidates and allow shareholders to vote on them. This move could set the stage for a potential boardroom challenge.

Despite Elliott's less than 10% ownership in common stock, the firm has been rapidly accumulating shares, according to the filing. This could potentially lead to a special meeting where an election could be held.

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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari