Ofo in China Reportedly Considering Bankruptcy Due to Cashflow Problems

2018-12-20 , 3:09 pm

Back in 10,000 BC, a caveman inscribed a bold prediction on the wall of a sabre-tooth tiger hideout:

Watch out bike companies; you might kena quite a lot of shit in the future.

But of course, nobody believed him. Not because his name’s John, but because everyone believed in rentable bikes.

Yet, it seems that the prophecy has hit a little closer than desired. Back in mid-2018, oBike closed down its local operations, citing difficulties in following new regulations (although seeing how they struggle to return user deposits, we’re guessing there’s another reason in place).

And now, China’s Ofo might be facing a little struggle of its own.

Or to be more specific: a rather big struggle.

Bankruptcy

Bike-sharing company Ofo might be doing pretty alright in the local scene, but the same can’t really be said about its China counterpart, which also happens to be the One That Rules It All.

According to the Financial Times, the startup (that’s backed by the formidable Alibaba Group) has encountered “immense” cash flow problems to the point where…

It has actually contemplated bankruptcy.

With that said, this revelation is perhaps best encapsulated in Ofo founder Dai Wei’s letter to employees.

“I’ve thought countless times … of even dissolving the company and applying for bankruptcy.

And to put things into perspective, Dai Wei exemplified just how bad the situation got.

“For the whole of this year we’ve borne immense cash flow pressure. Returning deposits to users, paying debts to suppliers, in order to keep the company running we have to turn every renminbi into three.”

Turn one dollar into three dollars? Even David Copperfield can’t do that.

Competition

If you’re under the impression that Singapore’s local bike-sharing scene is cutthroat…

Wait until you see China’s.

Indeed, the China bike-sharing industry is so competitive that hundreds of millions of dollars have been burnt in the fight to dominate key cities, with thousands of bikes littering the street in the process.

And perhaps, this might be the root cause of Ofo’s financial problems, seeing their tendency to ‘spam’ bikes even here in sunny Singapore.

Thankfully, however, it seems that Ofo China’s situation might not be hopeless just yet. In August, Reuters reported that Chinese ride-hailing giant Didi Chuxing and Alibaba’s Ant Financial were discussing a joint buyout clause with the bike company, in a move that saw the startup’s valuation reach US$2 billion.

But of course, whether the company’s bought over in the end remains to be seen.

Netizens react

With such big news revolving around the parent company of one of Singapore’s largest bike-sharing enterprises, one would expect Netizens to react accordingly. And in this case, it seems that I’m not disappointed.

One expressed a lack of surprise at the news.