Activist hedge fund Engine Capital has officially launched a proxy battle at ride-hailing firm Lyft, nominating two independent candidates to the company’s board in an effort to push for governance reform and improved shareholder returns, according to a report by Reuters.

The New York-based hedge fund, which holds approximately 1% of Lyft’s shares, has put forward Alan Bazaar and Daniel Silvers for election to the board, highlighting what it sees as a boardroom dominated by misaligned founders and a lack of directors with public markets experience.

“There is an urgent need for shareholder-driven change in Lyft’s boardroom,” said Engine Capital founder and portfolio manager Arnaud Ajdler in a statement, citing years of strategic missteps and value erosion compared to larger rival Uber.

Lyft’s dual-class share structure is a particular focus of Engine’s criticism. Founders Logan Green and John Zimmer collectively own under 2.5% of the company but retain roughly 30% of the voting power – an arrangement the hedge fund says undermines shareholder democracy and accountability.

Over the past five years, Lyft shares have declined by 64%, significantly lagging both the broader market and Uber, whose market capitalisation now exceeds $150bn. Lyft, by contrast, stands at just $4.6bn. While Uber has aggressively expanded internationally and built out its delivery and logistics offerings, Lyft has remained largely focused on North America and core ride-hailing.

Engine said it spent recent months engaging privately with Lyft’s leadership, offering what it called “value-enhancing ideas” and recommending director candidates with capital markets expertise. However, according to the hedge fund, Lyft’s nominating committee refused to interview the nominees, prompting the activist to go public.

The timing of the proxy fight coincides with Lyft’s announcement that it will enter the European market via a $200m acquisition of FreeNow, a German mobility platform. The news gave Lyft’s stock a modest 1% boost.

A Lyft spokesperson confirmed the company had been in discussions with Engine Capital but argued that the activist’s proposed directors do not add complementary skills to the board.

Lyft currently has a 10-member board, with four seats up for election at the upcoming annual meeting. The company requires shareholders to hold at least a 1% stake to nominate directors – a threshold Engine Capital meets.