The South Sea Bubble was the 1720 speculative bubble whose collapse helped define an early British stock-market crash.
The South Sea Company received a government-backed monopoly connected with trade in the South Seas. Its shares rose dramatically as investors were attracted by optimistic claims, political influence, and expectations of easy profits. Many people bought shares despite limited understanding of the company’s real trading prospects.
When confidence broke in late 1720, the share price collapsed. Investors across social classes suffered losses, and the scandal damaged public trust in financial speculation and government-linked companies. Parliament investigated the affair, exposing corruption and improper relationships between company promoters and officials.
The South Sea Bubble occurred alongside the Mississippi Bubble in France, but the two were separate schemes. It is also different from the Dutch tulip speculation of the seventeenth century, which involved bulbs rather than shares in a British joint-stock company.