The South Sea Bubble was the 1720 English speculative bubble whose collapse became an early stock-market crash.
The South Sea Company received rights connected with trade involving Spanish South America and assumed part of the British government’s debt. Its shares rose dramatically as investors believed the company would gain enormous commercial opportunities. The company’s actual trading prospects were far less impressive than the expectations surrounding its stock.
In 1720, Parliament approved a scheme allowing the company to convert government debt into shares. Promotion, easy credit, and speculative enthusiasm pushed the price to extraordinary levels. When confidence broke, the share price collapsed, ruining many investors and producing political scandal.
The South Sea Bubble occurred alongside John Law’s Mississippi Bubble in France, which also collapsed in 1720. The two events are sometimes blended together, but they involved different companies and countries. South Sea directors and politicians faced investigations, while the crisis encouraged later debate about financial regulation and corporate speculation.