Will Ofo pull through in a complex market dominated by monopoly capital?

Dai Wei, the founder and CEO of Ofo, China’s bike-sharing pioneer, told his employees on Wednesday “the company would not go bankrupt although all other things could happen”. Days ago, Ofo was exposed by Chinese media to have embarked on bankruptcy reorganization. Although Dai immediately refuted the rumor, analysts predict the startup’s future to be bleak, after the market has been messed up by malign competition and manipulative capital behind the scene.

Ofo has long been crippled by financing difficulties. About half a year ago, the company’s overall debt had scaled up to 6.49 billion yuan, among which 3.65 billion was its users’ deposit money while 1.02 billion belonged to suppliers, it’s previously reported. Now, Dai assured his employees “suppliers have swapped debt to equity and financial status was getting better,” while he also admitted that difficulties still exist.

An employee who didn’t want to be named told thepaper.cn, a Shanghai-based news portal, the ‘plenary’ staff meeting which Dai had addressed used to be held every month. “Dai would answer all questions from us at the meeting, but it was suspended for months before the current one,” he said, noting Dai also promised on the occasion to resume the gathering on a monthly basis in the future.

After the market leader Mobike was acquired by Meituan-Dianping, Ofo, known to be the last major independent bike-sharing firm in the market, has reportedly rebuffed an offer from Didi Chuxing, China’s ride-hailing giant. Dai, an entrepreneur born in the 1990s, is commonly regarded by his followers as being capable of pulling through unbearable pressures. However, in the eyes of analysts, the Beijing-based startup could hardly escape its doomed destiny this time if the acquisition deal is no longer on the table.

“From the very beginning, bike-sharing platforms are positioned as Internet business, which pumped in a flood of capital and subsidies, all aiming to acquire bigger share of market, while instead throwing the industry into vicious competition. The direct result is oversupply in the market,” wrote an ftchinese.com commentary by Chen Xinlei, a marketing management professor of the Shanghai Jiao Tong University.

According to data from the China Bicycle Association, in 2016, two million shared bikes were put into the market, and from January to April, 2017, 4-6 million more were added. Take Shanghai as an example. The city with a population of 25 million may only needs 500,000 shared bikes, but actually has over 1.7 million.

The sprawling expansion facilitated by continuous capital injections had forced down prices while leaving large numbers of bikes idle. All players in the market could hardly turn a profit.

To 2017, the bubble of bike-sharing platforms began to burst. Not only many companies had gone bankrupt, mountains of scrapped shared bikes became common in major Chinese cities. Also, sharply decreased demand for bikes left many new production lines idle and forced factories to shut down.

Chen said the investors behind the expansion had determined the business could hardly be profitable anymore and so they came up with a plan for a monopoly to dominate the market. “Mobike has been embraced by Meituan while Ofo will hit a dead-end if it refuses to be acquired.”

Chen, in her article, also called for regulators to tighten oversight on what’s called “Predator Pricing” practice in Internet-related industries, in order to curb similar capital-facilitated market manipulation or monopoly.