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NEW YORK - Engine Capital LP, owning about 1% of Lyft Inc. (NASDAQ: LYFT) shares, has called for significant governance and capital allocation reforms at the ride-hailing company, which currently maintains a market capitalization of approximately $5.2 billion. According to InvestingPro data, Lyft holds more cash than debt on its balance sheet, a key point of contention in the activist campaign. The activist investor has nominated two candidates for the board, seeking to replace current directors Sean Aggarwal and Betsey Stevenson, according to a definitive proxy statement filed with the U.S. Securities and Exchange Commission.
Engine Capital proposes that Lyft should immediately initiate a $750 million accelerated share repurchase program and revise its governance structure. This includes dismantling the dual-class share system that grants disproportionate voting power to the co-founders and de-staggering the board for more accountable director elections. The company’s strong cash position and significant cash flow generation, with levered free cash flow exceeding $766 million in the last twelve months, could support such initiatives.
The investment firm criticizes the existing board for lacking public company experience and financial sophistication, as seven out of ten directors have not served on any other public company board besides Lyft’s. Engine Capital’s nominees, Alan L. Bazaar and Daniel B. Silvers, bring extensive public company board experience and have records of enhancing shareholder value, the firm claims.
Lyft’s current capital structure is described by Engine as unoptimized, with a substantial net cash position and a business model that generates significant cash flow. The company’s governance is also under scrutiny for maintaining practices such as staggered elections and supermajority vote requirements, which Engine believes are not in shareholders’ best interests.
The activist investor’s move comes amid concerns over Lyft’s financial performance and decision-making under the current board, suggesting that Aggarwal and Stevenson have overseen negative total returns during their tenures and lack the necessary financial acumen. While InvestingPro analysis indicates Lyft has achieved profitability over the last twelve months with positive net income, the company’s valuation metrics remain elevated, trading at high earnings and EBITDA multiples. For deeper insights into Lyft’s financial health and valuation metrics, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
The press release statement from Engine Capital concludes with a call for shareholders to support its proposed changes by voting for Bazaar and Silvers on the BLUE Universal Proxy Card. The firm emphasizes that these governance adjustments are crucial for Lyft’s long-term value creation.
In other recent news, Lyft Inc. announced its acquisition of FreeNow, a European ride-hailing service, for approximately $197 million. This strategic move is anticipated to conclude in the second half of 2025 and is expected to double Lyft’s addressable market from 161 billion to over 300 billion trips annually. Analysts from Cantor Fitzgerald, Bernstein, DA Davidson, and BMO Capital Markets have maintained their respective ratings on Lyft’s stock, with price targets ranging from $14 to $15, reflecting a neutral stance on the company’s valuation. The acquisition is seen as a significant step for Lyft to expand its operations beyond North America into Europe, a market where Uber currently holds a dominant position.
FreeNow, which achieved EBITDA profitability in 2024, operates in over 150 cities across nine European countries, presenting Lyft with new growth opportunities. However, analysts express concerns about the competitive landscape, noting that Lyft will face strong competition from established players like Uber and Bolt in the European market. Despite these challenges, the acquisition is expected to enhance Lyft’s strategic value and provide opportunities for partnerships in fleet management and autonomous vehicle technologies. Additionally, activist shareholder Engine Capital has shown interest in Lyft’s governance by nominating two directors to the company’s board. The transaction aligns with Lyft’s strategy to diversify its operations and broaden its global footprint, as it seeks to compete in new markets and enhance its value proposition.
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