Ofo is rumored to be in deep trouble. According to a series of recent rumors, the company is reportedly grappling with cash woes and radical personnel changes, raising questions about whether the bike-sharing startup is doomed to bankruptcy.
Amidst the negative news, probably in a bid to ensure suspicious users and to calm down anxious investors and employees, Ofo tried to prove that it’s able to make money.
“Ofo’s B2B business is doing well and has generated a revenue of over RMB 100 million (USD 15.6 million) so far,” SHAO Yi, head of Ofo B2B business unit, told local media, “At the same time, Ofo has turned a profit in over 100 Chinese cities.”
The Ofo B2B unit was created two months ago in a bid to improve finances. The new division allows customers to put ads on yellow bikes or in Ofo app. This attempt to diversify its revenue stream may be hampered by local governments in many Chinese cities. For example, in September 2017, Beijing introduced a regulation which forbids commercial ads on shared bikes.
Bike-sharing is a cash-burning business. Rumors about Ofo’s cash crunch has been around for a while.
The latest word on the street is that Ofo has outstanding bills worth RMB 1.2 billion (USD 188 million) from suppliers, RMB 300 million (USD 47 million) for maintenance and operations, that’s RMB 1.5 billion (USD 234 million) in total, according to local media Caixin Weekly citing people familiar with the matter.
To address its financial problems, Ofo has allegedly misused user deposits worth billions of yuan. According to local news portal Sina, Ofo has amassed over the ten-billion-yuan worth of deposits, while according to the abovementioned Caixin Weekly report, the company’s current deposits are worth RMB 3.5 billion (USD 548 million).
The signs of Ofo’s cash woes have already emerged. The company has canceled deposit-free service in 20 Chinese cities, while rivals Mobike and Hellobike, respectively backed by Meituan-Dianping and Alibaba, are all pushing for deposit-free bike-sharing services.
Outside of China, Ofo’s global expansion plan is curbed as well. The operator of yellow bikes is reportedly downsizing its operation in Singapore and local logistics partners in the city-state are planning to sell 9k Ofo bikes as the Chinese company failed to pay freight and logistics fees.
Radical personnel changes
Apart from financial difficulties, a local media reported earlier this month that Ofo is laying off a large number of employees and several senior executives have or will resign, dismissing its entire overseas department and head of the department ZHANG Yanqi is said to have left.
Ofo co-founder YU Xin denied the rumor and said it’s unreasonable to dismiss the Singapore office, as Ofo is generating a revenue higher than the combined revenue of rivals.
Editor: Jason Zheng