What speculative bubble burst in London during the 1720 stock-market crash?

The South Sea Bubble was the speculative bubble that burst in London during the 1720 stock-market crash.

The South Sea Company received a British government arrangement connected with managing part of the national debt and promoted expectations of profitable trade with Spanish America. Its shares rose dramatically as investors bought into the company’s prospects, even though the anticipated commercial opportunities were far more limited than many believed.

In 1720, the company’s share price surged and then collapsed. The fall damaged investors, exposed questionable promotion and insider dealing, and produced a broad financial crisis in Britain. Parliament investigated the episode, and several prominent figures faced accusations of corruption.

The South Sea Bubble is often discussed alongside France’s Mississippi Bubble, which also collapsed in 1720. They were separate schemes in different countries. The word “bubble” later became a standard term for asset prices driven far above sustainable underlying value.