The South Sea Company became the symbol of an early stock-market bubble that collapsed after speculative trading in 1720.
Founded in 1711, the company received a monopoly over British trade with parts of Spanish South America in exchange for assuming government debt. Its actual trading opportunities were limited, but promotional claims and political connections encouraged investors to imagine enormous profits.
Shares rose dramatically during 1720 as more people bought into the excitement. Parliament passed the Bubble Act that year, restricting the formation of companies without a royal charter. Confidence then broke, the share price fell, and investors suffered severe losses. The collapse damaged public trust in financial promoters and companies.
The South Sea Bubble occurred alongside the Mississippi Bubble in France, associated with John Law’s financial system. These episodes are sometimes treated as identical, but they involved different companies and countries. The South Sea collapse also affected prominent figures, including Isaac Newton, who invested and later reportedly remarked that he could calculate the motions of heavenly bodies but not the madness of people.