More upheaval in the UK’s dockless bike hire market may be looming as Chinese giant Mobike pursues a partial sale of its European operations and rival Ofo grapples with massive financial problems.
The two companies raised billions of pounds to fund a global expansion of their services. But the Financial Times reports that both operations are losing tens of millions of pounds a month.
Ofo’s difficulties are revealed in a letter sent to employees last month by company founder, Dai Wei. “I’ve thought countless times ... of even dissolving the company and applying for bankruptcy,” he said. “For the whole of this year we’ve borne immense cash flow pressure.”
China Daily reported this week that Ofo was “facing various lawsuits as it struggles to resolve a debt crisis”. The paper added: “Its founder Dai Wei was put on a luxury-spending blacklist by a Beijing court on December 4, which prohibits him from staying in high-end hotels, and fast train or air travel.”
Ofo last summer cut back its operations outside China, including in the UK where it withdrew from Sheffield and Norwich and scrapped plans to launch in Leeds (LTT 20 Jul 18). In October it announced a withdrawal from the London boroughs of Waltham Forest, Richmond, Wandsworth and Redbridge, and half of Southwark (LTT 12 Oct 18).
The company’s problems have prompted more than ten million users to request the return of their refundable deposits, adding to the financial difficulties.
Mobike was acquired last spring by Chinese ecommerce giant Meituan Dianping, whose business is almost entirely focused on the Chinese market. Reuters reported that the equity value of the deal was $2.7bn.
The FT reported a source saying: “Meituan has no international division of any shape or form and probably doesn’t want one... We have been in discussions with potential investors to make Mobike a separate European entity and raise money against that. Meituan will maintain a stake in Mobike’s Europe business, but it may, over time, be a minority stake – it’s not divesting all of Mobike Europe.”
Mobike is facing an investigation in Germany for possible breach of the EU General Data Protection Regulation (GDPR).
Meituan is backed by Chinese social media giant Tencent Holdings. Rival Chinese tech giant Alibaba is invested in Ofo.
Ernan Cui of research firm Gavekal Dragonomics told the FT that Ofo may have difficulty finding a rescuer. “Its shareholding structure is complex,” she said. “They have Alibaba and Didi as investors, and Didi is invested in by [Alibaba’s rival] Tencent... so nobody particularly supports them.”
In an article published in Foreign Policy journal last week (‘The rise and fall of China’s cycling empires’), analyst Frankie Huang says: “After a missed opportunity to merge with Mobike and a failed Didi acquisition, Ofo stands on the brink of financial ruin, its only lifeline an Alibaba buyout that may never come.”
Added Huang: “At the end of every cycle of life and death for the latest tech bubble, it always seems to come down to Alibaba vs. Tencent, China’s two biggest tech giants.
“User and user data acquisition has much more strategic value for their ecosystems [than bike hire] to come up with increasingly targeted services and platforms. Alibaba staked food delivery and video streaming platforms. Only Alibaba and Tencent have the heft to operate bike-shares at a loss just to acquire geolocation user data.”
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