China’s bike-sharing giants could merge to stop the cash burning
Ofo is reportedly looking at raising US$1 billion in another financing round, less than two months after it raised US$700 million in July
China’s two biggest bike-sharing giants, Mobike and Ofo, could be merged, as investors of each firm soften their stance to outdo the other and put a brake on the money burning to strengthen user bases in a market increasingly squeezed by new players and regulatory policies.
Speaking during a forum in Shanghai earlier this week, Zhu Xiaohu, founder of GSR Ventures who have led the investments in Ofo, said it was now time to consider a merger as it was the only way to become profitable, after Ofo and Mobike have secured a combined 95 per cent of the Chinese bike-sharing market.
“Although Ofo and Mobike have dominated the market, they still require huge amounts of money every month to maintain operations. It is only when the two companies merge that they can become profitable,” Zhu was quoted as saying by the mainland Chinese media.
But when asked which company would be the acquirer, Zhu said that was not an issue to the investors.
His comments this week are an about-turn from a public dismissal three months earlier that the idea of a merger between the two firms was unlikely due to “cognitive difference”.
It is only when the two companies merge that they can become profitable
In June, Zhu had also argued with Pony Ma Huateng, founder and chairman of Tencent, which is a long-time investor of Ofo’s close rival, Mobike, over the popularity of the two companies in the market. The two billionaires had concluded the debate with an agreement to wait out for a year to see which company would overtake the other in China.