The South Sea Company collapse is a classic example of an early stock-market bubble and crash in Britain.
The South Sea Company was founded in 1711 and received a monopoly over British trade with parts of Spanish America in exchange for helping manage government debt. Investors became captivated by expectations of immense trading profits, even though the company’s practical commercial opportunities were far more limited than promotional claims suggested.
Its share price rose dramatically in 1720, drawing in investors from many social classes. When confidence broke, the price collapsed, ruining many holders and causing a broad financial scandal. Parliament investigated the company’s directors and uncovered corruption and improper conduct.
The South Sea Bubble occurred alongside the Mississippi Bubble in France, which was associated with John Law’s financial system. These are separate episodes, although both collapsed in 1720. The South Sea crash also prompted restrictions on joint-stock companies through the Bubble Act, which remained influential until its repeal in the nineteenth century.