The South Sea Bubble collapsed in 1720, causing a major early stock-market crash in Britain.
The South Sea Company received a government-backed arrangement connected with Britain’s public debt and promoted expectations of enormous trade profits. Its share price rose dramatically as investors bought into increasingly unrealistic claims about commerce with Spanish America. Speculation spread through London, and many people invested in the company and other ventures at inflated prices.
The bubble began to burst in late summer 1720. As confidence weakened, investors rushed to sell, prices collapsed, and many fortunes disappeared. The crisis affected members of the aristocracy, merchants, and ordinary investors. Parliament investigated the company’s directors and found serious corruption and financial misconduct.
The South Sea Bubble occurred during the same year as the Mississippi Bubble in France, but they were separate schemes. The episode helped establish “bubble” as a lasting financial metaphor and became an early example of how borrowed money, promotional excitement, and herd behavior can magnify market risk.