The 1720 collapse of shares in the South Sea Company, one of history’s earliest stock bubbles, was called the South Sea Bubble.
The South Sea Company was created in England in 1711 and received a government-backed monopoly over trade with Spanish South America. In practice, its trading opportunities were much more limited than many investors believed. The company’s shares nevertheless soared in 1720 as promotional claims and speculation attracted buyers.
The company’s rising price encouraged a wider wave of speculative ventures, including companies with little or no realistic business plan. Parliament passed the Bubble Act in 1720, partly to restrict unapproved joint-stock companies, but confidence in the South Sea Company soon weakened. Its share price collapsed, ruining many investors.
The South Sea Bubble is often discussed alongside the Mississippi Bubble in France, which also burst in 1720. They were separate schemes, although both reflected the period’s enthusiasm for paper wealth and speculative share trading. The scandal led to investigations and public anger in Britain.