What 1720 English stock-market bubble collapsed after the South Sea Company failed?

The 1720 English stock-market bubble that collapsed after the South Sea Company failed was the South Sea Bubble.

The South Sea Company was granted a monopoly over British trade with Spanish South America, although its actual trading prospects were limited. It also agreed to convert part of the British national debt into company shares. Promotional claims and speculative buying drove the share price sharply higher during 1720.

As investors tried to sell, confidence reversed. The company’s shares fell dramatically, ruining many investors and exposing corruption and insider dealing. Parliament investigated the episode, and several directors and politicians were implicated in the scandal.

The South Sea Bubble occurred alongside France’s Mississippi Bubble, which involved John Law’s financial system and the Mississippi Company. The two events are sometimes grouped together as the speculative crises of 1720, but they were separate schemes in different countries. The South Sea episode remains one of the best-known early examples of a stock-market bubble and collapse.