Market Loop - 💡Bulb’s special situation

ENERGY
Bulb’s special situation

What’s going on?
Yesterday Britain’s seventh largest energy supplier became the latest casualty of the energy crisis after entering special administration. Bulb is the 22nd supplier to go under since September.

Why is this important?

Another day and another energy supplier collapse but Bulb is the biggest one to date. Normally customers of a failed supplier are taken on by remaining providers. But with Bulb's 1.7m customers there are just far too many. Instead the company will enter special administration which means it will be run by the government until a more permanent solution can be found.

For months there have been rumours that Bulb was in financial trouble. In September it hired bankers to review the business and rival Octopus Energy even explored a takeover.

Like the 21 other failed providers before it, Bulb has been hit by the turmoil in the energy market. Gas prices have gone up 250% this year and surged by 70% since August alone due to a series of events including the post-lockdown global surge in energy demand. 

But providers have been unable to pass on rising prices to customers due to regulator price caps.

Bulb launched in 2015 and was a challenger to the Big Six energy companies. It grew quickly and prided itself on its renewable energy and competitive prices. But the rapid growth and pricing meant it struggled to turn a profit.

Takeaway
Bulb’s demise brings the total number of customers with failed suppliers to around 4m. The industry is calling for the regulator to reassess the price cap mechanism which has protected consumers from rising energy prices but choked off dozens of suppliers.

RETAIL
M&S attracts takeover interest

Yesterday shares in M&S rose 3% after reports that US private equity firm Apollo, was considering a takeover.

The buyout firm has a track record of bidding on UK supermarkets. It lost out on buying Asda last year, missed out on taking over Morrisons this summer and even considered a bid for Sainsbury’s.

Apollo apparently believes M&S is trading at a bargain with its share price weighed down by the impact of the pandemic. 

The buyout firm reportedly thinks that investors have undervalued M&S’s 50% stake in the online retailer Ocado which it bought for £750m in 2019. The deal allowed shoppers to buy M&S food online for the first time through the Ocado website.

M&S has struggled in recent years with shares down over 20% since 2016. However, two weeks ago it posted strong results and upgraded its profit forecasts as it rebounded from the pandemic.