The South Sea Company was at the center of the 1720 bubble that shook London’s stock market.
Founded in 1711, the company received a government-backed monopoly over trade with Spanish South America in exchange for taking on government debt. Investors expected enormous commercial profits, although the company’s actual trading opportunities were far more limited than popular excitement suggested.
Its shares rose dramatically in 1720, helped by speculation and by the company’s plan to convert more government debt into stock. When confidence weakened, prices collapsed. The resulting crisis damaged investors, politicians, and financial institutions in Britain.
The South Sea Bubble occurred alongside the Mississippi Bubble in France, associated with John Law’s company. These episodes are often grouped together as major examples of early modern speculative bubbles, but they were separate schemes in different countries.