The South Sea Bubble was the 1720 British company bubble whose collapse helped create a financial panic.
The South Sea Company received a government-backed monopoly over trade with Spanish South America, although its actual commercial prospects were far more limited than many investors imagined. In 1720, the company proposed converting a large amount of government debt into shares, encouraging speculation and political enthusiasm.
Its share price rose dramatically, attracting investors from different social classes. The boom spread as other joint-stock companies formed, including dubious ventures that became associated with the era’s speculative frenzy. When confidence broke late in 1720, South Sea shares collapsed and many investors suffered severe losses.
The scandal led to investigations of company directors and politicians. Parliament passed the Bubble Act in 1720, restricting the creation of joint-stock companies without a royal charter or legal authorization. The South Sea Bubble is distinct from the Mississippi Bubble in France, although both collapsed during the same extraordinary year of European speculation.