The founder of one of China’s bike-sharing behemoths Ofo has informed shareholders that the startup is facing “immense” cash flow problems and is considering insolvency, the Financial Times reports.
“I’ve thought countless times… of even dissolving the company and applying for bankruptcy,” founder Dai Wei wrote in a letter to employees this week. “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.”
Along with Mobike, the yellow bikes of Ofo have dominated China’s exploding bike-sharing industry. The two companies have released more than 20 million bikes onto China’s streets in the past two years. The rapid growth, however, has largely been through grabbing massive investment and using that to fuel quick expansion.
According to the FT, Mobike’s monthly expenditures are as high as $50 million, with Ofo’s at $25 million.
Tens of millions of Ofo users are now seeking to redeem their Rmb 99 ($14) deposit when they signed up to the app, with many queuing outside local headquarters.