The 1720 British speculative collapse involving the South Sea Company and a rush into shares was the South Sea Bubble. The episode centered on the South Sea Company, whose share price rose dramatically before collapsing later that year.
The company received a proposal to convert much of Britain’s national debt into shares and expected valuable trading opportunities with Spanish America. Those commercial prospects were greatly exaggerated, while political connections and promotional enthusiasm encouraged investors to buy. Shares rose from about £100 early in 1720 to more than £1,000 during the summer.
The rise attracted speculation in many other companies, including ventures with implausible or deliberately vague business plans. When confidence broke, South Sea shares fell rapidly, ruining investors and exposing corruption among politicians and company promoters. Parliament investigated, and several prominent figures were disgraced.
The South Sea Bubble occurred alongside the French Mississippi Bubble, but the two were separate schemes in different countries. Both collapses became enduring examples of financial speculation, leverage, herd behavior, and the danger of buying assets solely because prices are rising.