Deals | Raise or Fail? Ofo Reportedly Seeking New Financing to Sustain Operation

China’s top bike-sharing startup appears to be undergoing cash woes.

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Deals | Raise or Fail? Ofo Reportedly Seeking New Financing to Sustain Operation

Rumor has it that Chinese bike sharing service Ofo is looking to raise a new round of financing from a group of investors led by Alibaba.

The rumor came in the wake of a news piece published last week by Tencent Tech news service claiming that Ofo is running low on cash and currently has only enough money to support its operation for one more month, which translates to, without new financing coming in, Ofo, one of the top two Chinese bike sharing service providers is doomed to fail in a month.

The Tencent Tech story also blurted that the rides of ofo have fallen by 60% comparing to its peak period. Additionally, Ofo still owes RMB 2.5 billion (approx. US$388 million) to suppliers and it has misappropriated the deposit fees worth in total RMB 3 billion (approx. US$466 million), according to a source close to Tencent Tech.

Ofo discarded the report as unfounded rumors, and said it had filed a lawsuit against Tencent, which backed Ofo’s rival Mobike, for deliberate defamation that misled the public and damaged the Beijing-based company’s reputation.

Tencent Tech said it has adequate data to support its story.

Image credit to 123rf.com.cn.

According to industry insiders, it’s very possible for Tencent to acquire the ops data of ofo, as Tencent-backed Didi happens to be Ofo’s largest shareholder. But at the same time, it makes sense that bike rides fall during the winter period.

Ofo and Mobike, the top two players in this game of getting Chinese back on bicycles, are backed by tech giants Alibaba and Tencent, respectively.

Founded in 2013, OFO is one of the Chinese unicorns with a valuation of more than US$ 3 billion. According to public data, it has raised an accumulated 1 billion US dollars. The company completed an E round in last June invested by Alibaba, Honyi Capital, CITIC PE, etc.