Future Energy, the Newcastle-based supplier of gas and electricity, ceased trading last week, leaving about 10,000 customers across Yorkshire in the lurch.
Now it has emerged around 40 small investors put cash into the ailing power supplier just months before it went bust.
Shareholders were asked to invest more money in the energy company late last year after it struggled to hit growth targets and buy power in the wholesale market, Newcastle wealth manager Tier One Capital said.
Future Energy was set up in 2014 as a rival to the big six energy suppliers. It was touted to wealthy punters as an Enterprise Investment Scheme (EIS), which offers income tax relief. Its collapse has cost investors millions of pounds.
Tier One raised £1.9 million from about 40 investors towards the end of last year, and filings at Companies House confirm it issued 19,000 new shares as recently as October 2017.
In promotional material sent to would-be backers in 2016, Tier One called Future Energy “a true north east powerhouse in the making” offering shares at £7.50 each.
Shareholders then received “urgent calls for more cash” in autumn of last year after the supplier failed to hit performance targets, said Tier One, but it added the suppliers management also invested significant sums in the energy firm, and “went as far as possible to help”.
It said: “all risks were fully disclosed both in writing and in person at a special meeting for shareholders in November. We are disappointed a promising energy business could not manage to compete against the major energy firms.”
In 2016 the rising price of wholesale power caused the collapse of another small supplier, GB Energy, which affected around 160,000 customers.
Meanwhile Ofgem is trying to find suppliers to take over Future Energy’s 10,000 clients, and said their outstanding credit balances will be protected.
Future Energy’s chief executive, David Stroud said: “We have been unable to convert sufficient customers to enable us to forward purchase energy at the most competitive rates.
“The marketplace is difficult for challenger energy suppliers, which lack the financial advantages of larger, national energy firms.”