The South Sea Bubble was the 1720 English speculative bubble that ended in a major stock-market collapse.
The South Sea Company received a government-backed monopoly over trade with parts of Spanish America in 1711. Its shares rose dramatically as investors imagined enormous commercial profits, even though the company’s actual trade prospects were much more limited.
Speculation spread beyond the company itself. New ventures appeared, and people bought shares mainly because prices were rising. Parliament passed the Bubble Act in 1720, restricting companies operating without a charter, but the measure did not prevent the South Sea Company’s collapse later that year.
The South Sea episode is often mentioned alongside France’s Mississippi Bubble and the Dutch tulip speculation. These events were different financial episodes, however. The South Sea Bubble centered on a chartered joint-stock company and helped expose weaknesses in early eighteenth-century financial regulation.