Company Behind Fallen Bike-Sharing Unicorn Ofo Found to Lack Executable Funds
According to enterprise information platform Tianyancha, Dongxia Datong (Beijing) Management Consulting Co. Ltd., the operator of the now defunct bike-sharing platform Ofo, was found to possess no executable funds following a court order on June 10.
Legal action taken by the Beijing Haidian People’s Court following a contract dispute lawsuit included an investigation into the company’s savings, real estate and other aspects of their business, finding no funds available for execution. The firm will be subjected to consumption restrictions until there are available funds, the court said.
Shareholders of Dongxia Datong, OFO (HK) Limited and its legal representative Chen Zhengjiang have received hundreds of such consumption restriction orders.
Originally one of the earliest and strongest competitors in the burgeoning bike-sharing industry, Ofo was created in Beijing by a group of Peking University students in 2015 and quickly found room for expansion in the heavily populated urban spaces of China. Soon enough, Ofo dominated city streets with their bright-yellow bikes, affably nicknamed “little yellow bikes”.
Backed by funding from Xiaomi and Didi Chuxing, its expansion continued, venturing outside of China and bringing its bike-sharing services to places including the US, the UK, France and Singapore. By 2017, it was valued at more than $1 billion and gained additional funding from Alibaba, Hony Capital and Citic PE.
Ofo’s downfall is primarily attributed to its founder and CEO Dai Wei’s oversized ambitions, the company’s deviated focus and a rise in power of competitors. After turning down Didi Chuxing’s acquisition offer and a chance to merge with its biggest rival Mobike, Ofo not only brushed aside the responsibility to improve its products, but also kept investing huge amounts in projects deemed unnecessary by the public, such as the launch of an “entertainment satelite” in 2017.
Faced with a widened gap between profits and losses, Ofo recognized the urgency to find ways to make up for its financial deficits, and thus raised the deposit each user had to pay from its original level of 99 yuan ($15.5) to 199 yuan ($31).
This policy change backfired, however, as new companies like Alipay-backed Hellobike boasted deposit-free rides alongside newer and smoother bikes. Mobike also received funding worth $2.7 billion from Meituan, and offered cheaper alternatives. All of a sudden, Ofo was thrown to the bottom of consumer preferences.
In mid-2018, the cash-strapped company began its gradual withdrawal from the market, making its exit from both domestic and international stages and laying off staff. Dai Wei declined yet again a $2 billion buyout offer from Didi and Ant Financial, attesting that he would not have sold the company even for $10 billion.
Deposit refund requests flooded in from disgruntled customers, but Ofo was far from able to pay the huge bill. On the verge of bankruptcy, it quietly withdrew from the market, and the yellow bikes that once dominated Chinese streets were nowhere to be found.
Nevertheless, the debt remains. According to Chinese media, Ofo has received over 15 million requests for deposit refunds, owing an amount of around 1.5 billion yuan ($235 million) as of 2020. Today, after years of contract disputes and debt issues, Ofo has repeatedly been sued, with Dai subjected to consumption restraints.
SEE ALSO: Ofo Launches Campaign Urging Users to Spend $200 to Get Deposits Back
However, actual refunds for the customers now appear impossible. Many call for more serious legal actions for their money lost.
With stricter regulation imposed on the country’s sharing economy platforms, China has now moved past the era in which shared-bike companies peaked. In 2021, Beijing aims to cap shared bikes in the city center at 800,000, significantly lower than a 2017 estimate of 2.4 million.