Dec. 9 (NBD) -- Shanghai-based e-commerce platform Taojiji's founder and CEO Zhang Zhengping confirmed in an open letter on Monday (December 9) that the company was forced to file for bankruptcy due to its inability to restructure as a potential investor didn't inject money into the platform as planned.

"Unfortunately, I have to declare that Taojiji failed in its attempt to restructure because the fund promised had not been put in place as expected. The company will seek for bankruptcy liquidation or bankruptcy reorganization later," wrote Zhang in the letter to agents, suppliers and employees.

File photo/Wang Xingping (NBD)

Taojiji had held talks with two potential investors since early October and eventually nailed down the investment agreement with one of them, the founder said. However, the investor that has signed the agreement with the e-commerce platform and taken over the company's official seals has delayed the remittance of funds many times, adding further woe to the company financially.

The e-commerce startup's accounts have been frozen, resulting in a failure to pay employee wages for November as well as their social insurance.

"We also find no access to get the employment separation certificate now," a former Taojiji employee said to National Business Daily (NBD) on Sunday (December 8). "The company is almost in a state of neglect."

Another employee also articulated his worry to NBD that a delay in social insurance payment will impose significant influence on non-native's application for household registration in Shanghai.

According to Zhang Zhengping, a team will be set up to deal with contract teminations.

Taojiji fell down the familiar rabbit hole of Chinese tech startups that burn through money to get new users. The company incurred a loss of 1.2 billion yuan (170 million U.S. dollars) from early this year to mid October and the monthly loss further widened to no less than 200 million yuan (28 million U.S. dollars), according to media outlet LatePost.

The online marketplace initiated a reshuffle to pay back the debt this October after it misused 1.6 billion yuan (225 million U.S. dollars) of merchants' funds to acquire new users. Zhang Zhengping admitted in the open letter that he made "a huge mistake" to maintain growth by subsidising shoppers with generous cash incentives.  

Embroiled itself in a debt crisis today, Taojiji was once a favorite in the capital market for its 130 million registered users accumulated only one year after it went online in August 2018. 

The enormous customer base attracted a number of investors with a goal of grabbing a slice of China's e-commerce market. Having Tiger Fund, DTS Global and K2 Venture Partners on its investor list, the e-commerce platform raised 42 million U.S. dollars in its Series A round in October 2018, giving the startup a 242 million U.S. dollars price tag.

Email: lansuying@nbd.com.cn