The South Sea Company’s shares became the center of Britain’s famous 1720 speculative crash.
The company was founded in 1711 and received a monopoly over British trade with parts of Spanish South America. In practice, the expected trade opportunities were far less valuable than many investors imagined. A scheme in 1720 allowed the company to take over a large portion of the national debt, and its share price rose dramatically as promoters and speculators spread optimistic claims.
The shares climbed from about £128 in January 1720 to roughly £1,000 by August before collapsing. The collapse ruined many investors and damaged confidence in British finance. Parliament investigated the company’s directors, and several officials were accused of corruption. The South Sea Bubble occurred alongside the Mississippi Bubble in France, but the two were separate schemes. It also predates modern stock exchanges and electronic trading by centuries; transactions took place through London’s informal financial markets and coffeehouse networks.