The 1720 British stock-market bubble that collapsed after Parliament investigated the South Sea Company was the South Sea Bubble.
The South Sea Company received a government-backed monopoly over trade with Spanish South America, although its actual commercial prospects were limited. In 1720, it proposed converting much of Britain’s government debt into company shares. Investors rushed to buy, and the share price rose dramatically before collapsing later that year.
The collapse damaged investors, including members of the political establishment, and prompted a parliamentary inquiry. The investigation uncovered bribery and improper influence involving company directors and officials. Parliament responded with measures that restricted the formation of joint-stock companies.
The South Sea Bubble is often discussed alongside France’s Mississippi Bubble and the Dutch tulip mania. A common mistake is to call all three events stock-market crashes in the modern sense; the South Sea episode was an early speculative bubble involving shares, government finance, and public trading. Its name refers specifically to Britain’s South Sea Company.