The South Sea Company’s share price collapsed during the 1720 South Sea Bubble.
The company was founded in 1711 to trade with Spanish South America, but its commercial prospects were far less impressive than promoters suggested. In 1720, Parliament approved a scheme allowing the company to assume part of the British national debt. Shares rose dramatically as investors expected enormous profits from overseas trade and debt conversion.
The boom attracted members of the public and influential political figures. The Bubble Act, passed later in 1720, restricted competing joint-stock companies, although it did not prevent the South Sea Company’s collapse. As confidence weakened, investors rushed to sell. The share price fell from its extraordinary summer peak, ruining many holders.
The South Sea Bubble is often confused with the Mississippi Bubble, a separate French speculative episode that also burst in 1720. Both helped establish “bubble” as a lasting term for a speculative market boom followed by a sharp collapse.