Wednesday 19 December 2018 4:09 pm

Alibaba-backed dockless bicycle startup Ofo facing bankruptcy

Chinese bike-sharing startup Ofo has reportedly considered filing for bankruptcy, after coming under "immense" financial pressure resulting from a lack of cash flow.

The firm, which operates a yellow dockless bicycle scheme across London and in other cities, has raised more than $2.2bn (£1.7bn) in funding since it was founded in 2014 from the likes of tech giant Alibaba.

According to reports from the Financial Times, Ofo founder Dai Wei told employees in a letter today that the business has been burning through cash as a result of "not being able to correctly assess the changing external environment from the end of last year".

"I've thought countless times … of even dissolving the company and applying for bankruptcy," Dai said.

"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."

The FT reported that more than 10m Chinese users have attempted to apply for refunds on their deposits for the scheme, which costs 99 yuan (£11.36). 

Rival firm Mobike is said to be in a similar financial position, with industry estimates putting the firm's cash burn rate at $50m per month, compared to Ofo's estimated $25m.

Ofo last raised funds in March earlier this year, netting an $866m fundraising round which was led by Alibaba. Ride-hailing firm Didi Chuxing, which participated in Ofo's $700m fundraising round last year, was said to be in talks to buy Ofo in August.

The startup has not fared well in London to date, having recently withdrawn from several boroughs across the capital due to widespread vandalism of its bikes.

A spokesperson for Ofo has been contacted for comment.