Reportedly, Ofo, a Chinese bike-sharing startup, has considered filing for bankruptcy, after it came under “immense” financial pressure that resulted from a lack of cash flow.
The firm operates a yellow dockless bicycle scheme across various cities including London. It has raised more than $2.2 billion (£1.7 billion) in funding since it was established in 2014 from the likes of Alibaba, a tech giant.
According to reports from the Financial Times, Dai Wei, the founder of Ofo, informed the employees of the company in a letter that was sent today that the business has been burning through cash as an outcome of “not being able to correctly assess the changing external environment from the end of last year.”
Dai stated: “I’ve thought countless times … of even dissolving the company and applying for bankruptcy.”
He added: “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 Financial Times reported that more than 10 million Chinese users have tried to apply for refunds on their deposits for the scheme, which costs 99 yuan (£11.36).
Mobike, a rival company, is said to be in a similar financial position, with industry estimates placing the cash burn rate of the firm at $50 million per month ad compared to the estimated $25 million of Ofo.
Last March, Ofo last raised funds netting an $866 million fundraising round which was led by Alibaba. Didi Chuxing, a ride-hailing company which participated in the $700 million fundraising round of Ofo last year, was said to be in negotiations to acquire Ofo last August.
To date, the startup has not fared well in London having recently withdrawn from various boroughs across the capital because of widespread vandalism of its bikes.
An Ofo spokesperson has been contacted for comment regarding the matter.