The South Sea Company became the central symbol of the stock speculation known as the South Sea Bubble. Founded in 1711, it received a monopoly over British trade with Spanish South America in exchange for taking on part of the government’s debt.
The company’s actual trading opportunities were far smaller than many investors imagined. Nevertheless, promotional claims and political connections helped drive its share price upward in 1720. Investors bought shares partly because prices were rising and partly because the company offered installment-based subscription arrangements.
As confidence weakened, the share price collapsed later that year. Many investors lost fortunes, and the scandal damaged public trust in company promoters and government officials. Parliament investigated the episode, and several people were accused of corruption.
The South Sea Bubble happened alongside the Mississippi Bubble in France, associated with John Law’s financial system. The two events are often discussed together, but they were separate companies and national crises.