The South Sea Company was at the center of Britain’s famous 1720 stock-market bubble and crash.
Founded in 1711, the South Sea Company received a government-backed monopoly over trade with Spanish South America in exchange for taking on part of Britain’s public debt. In practice, its expected commercial opportunities were far greater than its actual trade. Optimistic stories about profits helped drive its shares dramatically higher in 1720.
Speculation spread beyond the company itself, and Parliament passed the Bubble Act amid concern about unregulated joint-stock schemes. When confidence broke, South Sea shares collapsed, ruining many investors and damaging public trust. The same year also saw the collapse of John Law’s Mississippi Company in France. A common mix-up is calling the event simply the “South Sea crash”; the standard historical name is the South Sea Bubble, referring to both the speculative rise and collapse.