The South Sea Bubble was the speculative boom and crash surrounding the South Sea Company in Britain in 1720.
The company received a government-backed role in managing part of Britain’s national debt and promoted expectations of highly profitable trade with Spanish America. Its shares rose dramatically as investors chased gains, even though the company’s realistic commercial prospects did not justify the price. Parliament’s Bubble Act and the collapse of confidence helped end the mania.
The crash ruined many investors and damaged the reputations of prominent figures, including Isaac Newton, who reportedly lost money after buying and later re-entering the market. The South Sea Bubble unfolded alongside John Law’s Mississippi Bubble in France, but they were separate schemes. “Bubble” became a lasting term for markets in which prices detach from underlying economic value before collapsing.