Bike-share firm Ofo struggling with cash flow, CEO tells staff

Ofo has become something of a cautionary tale about the rapid debt-fuelled boom and burst of new technology enterprises in the country.
Ofo has become something of a cautionary tale about the rapid debt-fuelled boom and burst of new technology enterprises in the country.PHOTO: AFP

SHANGHAI/HONG KONG • Chinese bike-sharing start-up Ofo, backed by Alibaba Group, is battling “immense” cash-flow problems and disbanding the firm has been considered as an option, its chief executive said in a letter to employees.

The firm, whose yellow-hued bicycles litter city streets around China, has been hit by a costly battle with main rival Mobike, owned by Meituan Dianping, that has eroded its ability to make payments to suppliers.

In the past week, millions of users have also applied for a return of the deposits they had paid to use the platform, adding to the firm’s financial woes.

“The whole of this year we’ve borne immense cash-flow pressures. Returning deposits to users, paying debts to suppliers and keeping operations running,” Mr Dai Wei said in the letter dated Dec 19 posted on social media by Ofo’s head of public relations.

“It has meant turning every renminbi into three,” Mr Dai said. He added that he had thought “countless times” about ways to resolve the issues, “even of dissolving the company and applying for bankruptcy”.

Mr Dai, also Ofo’s founder, added that he was determined to keep the company afloat. “As pressures mount, we must endure; as difficulties grow we must find ways to overcome them,” he said in the letter.

Ofo, which started on university campuses in Beijing and expanded to countries around the world, has become something of a cautionary tale about the rapid debt-fuelled boom and burst of new technology enterprises in the country.

 
 
 

China’s bike-sharing industry has seen firms burn through hundreds of millions of dollars in the fight to dominate key cities, with several going under or taken over.

Ofo’s smaller peer, No.1 Bicycle, halted services in February, while Bluegogo, facing financial pressure late last year, ended in a tie-up with ride-hailing giant Didi Chuxing.

In August, Reuters reported that Didi and Alibaba’s Ant Financial were in talks with Ofo for a joint buyout, potentially valuing the start-up at up to US$2 billion (S$2.7 billion).

As word of Ofo’s woes spread, nearly 2,000 people gathered outside Ofo’s headquarters in Beijing on Tuesday morning, anxious to know whether – and when – their deposits would be returned.

The company claimed 200 million users in China as of November last year, meaning deposits could amount to as much as 20 billion yuan (S$4 billion).

By 5pm on Tuesday, the refund system of the Ofo app showed that more than 9.7 million users were waiting for refunds, with requests totalling at least 920 million yuan.

REUTERS, CHINA DAILY/ASIA NEWS NETWORK

A version of this article appeared in the print edition of The Straits Times on December 21, 2018, with the headline 'Bike-share firm Ofo struggling with cash flow, CEO tells staff'. Print Edition | Subscribe