A recent local media report suggested that China’s bike-sharing giant ofo, which is said to be cash-strapped, was misusing customer deposits worth over 10 billion yuan (US$1.6 billion).
The firm has denied misappropriating user funds, Beijing Business Daily reported.
Ofo said the proliferation of such false reports has seriously affected the company’s brand image, adding that it has reported the matter to authorities.
One must pay a deposit fee of 99 yuan to be able to use the firm’s shared bikes. According to Chinese business news outlet Caixin Weekly’s report, ofo’s latest financial data showed that the company was holding 3.5 billion yuan of user deposits.
However, ofo should have had 20 billion yuan in deposits as it claims to have about 200 million registered users.
The company started offering deposit-free rides after partnering with Sesame Credit under Ant Financial in March last year. One year later, the firm announced that nearly 30 million users enjoyed deposit-free rides, saving them deposits worth about 4 billion yuan.
However, even taking the deposit-free rides into account, the firm should still hold about 16 billion yuan. Compared with the 3.5 billion yuan of user deposits from the firm’s financial data, the report suggested that ofo has embezzled over 10 billion yuan in user deposits.
Ofo said in a statement that the financial data cited in the recent report is false, and the suggested calculation is “incompatible with the business model of the bike-sharing industry”. It also said the company has turned profitable and is trying to diversify its business model.
Bike-sharing has become a hot sector in China after investors pumped billions into startups. Industry leaders ofo and Mobike has started to expand aggressively overseas since last year.
However, firms are finding it increasingly difficult to make money in the business amid the fierce competition, with some players going broke.
Ofo is reported to be reeling from a cash crunch. TechNode reported that the bike-sharing operator has launched a warehouse sale of its bikes to downsize its operation in Singapore, its first overseas market.
It has also cut nearly half of its 60-member team in the city state, the report said, citing an unidentified source.
This article appeared in the Hong Kong Economic Journal on June 12
Translation by Ben Ng with additional reporting
[Chinese version 中文版]
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