The South Sea Company’s shares became the focus of speculative trading during Britain’s 1720 South Sea Bubble.
The company was founded in 1711 to trade with Spanish South America, but its commercial prospects were limited by war and Spanish restrictions. In 1720, Parliament approved a plan allowing the company to assume part of Britain’s national debt. Promotional claims and rising prices attracted investors far beyond the company’s realistic earning potential.
The share price rose dramatically before collapsing later in 1720. The crash ruined many investors and damaged public confidence in company promoters and political leaders. The Mississippi Bubble in France occurred during the same broad era and is often discussed alongside it, but it centered on John Law’s Mississippi Company rather than the South Sea Company.
The episode helped establish “bubble” as a lasting term for speculative market manias. Parliament later investigated corruption connected with the scheme, and several directors faced serious consequences.