Which 1720 British company’s collapse helped cause the South Sea Bubble crash?

The South Sea Company’s collapse helped cause the South Sea Bubble crash in Britain in 1720.

The company was founded in 1711 and received a government-backed monopoly over trade with Spanish South America, although its practical trading opportunities were limited. Its shares rose dramatically as the company promoted plans to convert government debt into equity and investors expected enormous commercial profits.

Parliament passed the Bubble Act in 1720 amid the speculative frenzy, restricting companies formed without a royal charter or parliamentary authority. The South Sea Company’s share price then collapsed, ruining many investors and damaging public confidence in financial speculation.

The episode was part of a wider European speculative crisis. France’s Mississippi Company bubble also burst around the same period. Isaac Newton, who had invested in the South Sea Company, reportedly lost heavily, although the popular quotation about calculating the madness of crowds is difficult to verify in its usual form.