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The founder of Chinese bike-sharing company ofo has conceded that the service is on the brink of bankruptcy after a year of “immense” cash flow problems, days after reports emerged that millions of people were waiting online for the return of their deposits.
In a message to ofo employees released Wednesday, founder and CEO Dai Wei conceded that on numerous occasions he had considered “dissolving the company and applying for bankruptcy.”
Referencing ofo's debts and efforts to repay deposits to millions of users, Dai said “to keep the company running we have to turn every one yuan into three.”
On Monday morning, ofo users arrived at the company's headquarters in Beijing, demanding the company repaid their deposits of between 99 and 199 yuan ( between14 and 29 U.S. dollars).
Online, the “queue” of users awaiting the return of their deposits from the company has exceeded 10 million, with social media users posting screenshots showing the millions of users ahead of them in the refund process.
ofo users line up outside the company's office in Beijing to demand the return of their deposits. December 18, 2018. /VCG Photo
In October, ofo denied media reports that it was facing bankruptcy, with speculation that the company faced liabilities of about 6.5 billion yuan (932 million U.S. dollars), including 3.65 billion yuan of users' deposits and more than one billion in debt owed to suppliers.
One month later, users began reporting that the company was not returning deposits, and was instead directing customers to place their money into an online peer-to-peer lending scheme. ofo again denied the reports, insisting its refund process was fully operational and that users could choose not to take part in the P2P scheme.
According to Dai's message, ofo had failed to “correctly assess the changing external environment from the end of last year.”
The company has received hundreds of millions of dollars in funding in recent years, with an 866 million-U.S. dollar funding round completed earlier this year.
However, a failed overseas expansion strategy that saw ofo enter markets in Europe and the U.S. was just one factor in the company burning through funds. According to the Financial Times, ofo was burning through an estimated 25 million U.S. dollars each month earlier this year.
Rival bike-sharing firm Mobike has also withdrawn from overseas markets, taken over by Meituan Dianping in April this year, in a deal that looks to have secured its finances, valuing the company at 3.7 billion U.S. dollars.
(CGTN)
