Elliott Hunts Bigger Prey, Testing Limits in Barrage of Activism

John Pike got the message on a brisk Wednesday morning in mid-October. Southwest Airlines was ready to negotiate its surrender.

The budget carrier blinked rather than face a proxy fight with Pike’s employer, Elliott Investment Management, the $70 billion activist hedge fund that about 48 hours earlier had publicly called for a special shareholder meeting. In the days that followed, Southwest gave Pike much of what he demanded, as well as something his firm needed in an era when activists face ever-larger opponents: Reupping its street cred as the investor you never take to the mat.

If Southwest hadn’t ...