The South Sea Bubble burst in 1720 after the collapse of the South Sea Company’s speculative share price.
The South Sea Company received a monopoly over British trade with parts of Spanish South America, although its actual commercial opportunities were limited. It also proposed converting government debt into company shares. Expectations of easy profits drove its stock price from about £128 in January 1720 to more than £1,000 in August.
When confidence broke, the price collapsed, ruining many investors and damaging credit. Parliament investigated the company’s directors and found widespread corruption. The crisis also affected other speculative ventures and led to the Bubble Act of 1720, which restricted companies operating without a formal charter.
The South Sea Bubble occurred alongside France’s Mississippi Bubble, but they were separate schemes. Both became classic examples of speculative bubbles and financial-market contagion.