A Chinese court has ruled that bike-sharing startupOfo, once valued at upwards of $2 billion, has noability to pay its massive debts to either suppliersand users, adding another chapter to a cautionarytale for investors in China's frothy startup sector.
Ofo "has basically no assets" and therefore cannotrepay Tianjin Fuji-Ta Bicycle, a supplier that suedthe operator of the bike-share company this year torecover the roughly $36 million it was owed, a court in the city of Tianjin ruled on Monday (June17).
It noted that the company's bank accounts either have a zero balance or are frozen, and that ithad no property, cars, or investment assets either, in a verdict first reported by ChinaSecurities Journal, part of the state-run Xinhua news group.
Ofo, founded five years ago, once rode high on the expectation that more and more people inChina would start to use its dockless bikes to cover the first or last mile of their commutes.
The company raised more than $2.2 billion in eight rounds between 2015 to 2018, with Chinesee-commerce giant Alibaba Group and ride-hailing operator Didi Chuxing among its majorinvestors.
Over the same period, Mobike, Ofo's biggest rival, also received more than $900 million, as thebike-share sector took off, even inspiring a host of other "sharing" businesses.
Bike-share companies placed scores of bicycles across Chinese cities, which users could rent fora small deposit that started at 99 yuan($14.3) and an even smaller hourly charge.
But the bikes faced vandalism and theft, and were left in untidy piles that city authorities hadto deal with. Even more problematic was how they could make money by charging just a fewcents per ride, while shelling out for hundreds of thousands of bikes.
By 2017, some showed signs of faltering.