After shutting down operations in multiples countries, facing a severe cash crunch and rising debt, bicycle rental company ofo’s growth plan seems to have gone adrift. And this has given good reasons to media to talk about the company.
The recent reports of ofo’s acquisition by Didi Chuxing, which is claimed to be worth $2 billion, is met with strong rebuttal by the bike rental company.
Local media reported that minority shareholders have begun receiving documents about the deal. Responding to the report, ofo co-founder Yu Xin called it rumours, saying that the company had dealt with them on Monday and again on Wednesday.
Xiao Min, partner at Matrix Partners China, lead investor in ofo’s series B, said that the rumours are “fake news.”
Importantly, the reports are not new and have been circulating for months.
Experts say that theofo is not in a very good shape and might need to sell off the business. This will happen, sooner or later.
A quick look on the recent functioning of ofo gives a clear picture on the health graph of the company.
In the past few months, it has retreated from International markets. It has already left or is in the process of leaving India, Germany, the US, Spain, Australia, and South Korea.
Besides, the company has paid off just 20 per cent of its RMB 3 billion debt. ofo also mortgaged its bicycles for an RMB 1.77 billion loan from Alibaba, according to a Technode report.
In an attempt to generate additional income it began selling advertising on its bicycles and within its app.
The company is also facing strong challenges against rivalries in China such as Meituan-owned Mobike and HelloBike. Mobike recently did away with deposits to standardize its platform, while HelloBike has been winning the battle in lower-tier cities.
While ofo closed operations in India, Mobike is expected to start its services soon in the country.