The 1720 collapse caused partly by speculation in South Sea Company shares is called the South Sea Bubble.
The South Sea Company was founded in 1711 and received a government-backed monopoly over trade with Spanish South America, although its actual trading opportunities were limited. Its shares rose dramatically in 1720 as investors were encouraged by promotional claims, easy credit, and the company’s plan to convert government debt.
Prices peaked in August 1720 before confidence collapsed. Isaac Newton, who had sold shares earlier, reportedly reinvested and lost heavily when the bubble burst. Parliament investigated the scandal, and several directors were punished.
The South Sea Bubble occurred alongside John Law’s Mississippi Bubble in France. Both episodes showed how expectations, credit, and fashionable financial stories could drive prices far beyond realistic business prospects. They are among the earliest famous examples of a speculative financial bubble.