The 1720 collapse of a British trading company regarded as an early major stock-market crash was the South Sea Bubble.
The South Sea Company was established in 1711 and received a government-backed monopoly over trade with parts of Spanish South America. In practice, the company’s commercial prospects were far more limited than the excitement surrounding its shares suggested.
During 1720, its stock price soared as investors speculated and as the company proposed converting government debt into company shares. Parliamentary support and promotional claims encouraged confidence. When expectations failed and selling began, the price collapsed before the end of the year.
The scandal damaged investors and led Parliament to investigate corruption. The Bubble Act of 1720 restricted the formation of joint-stock companies without a royal charter or parliamentary authorization. The South Sea Bubble occurred alongside the Mississippi Bubble in France, but they were separate schemes.