The British market bubble that collapsed in 1720 after the South Sea Company’s shares surged and fell was the South Sea Bubble.
The South Sea Company received a government-backed arrangement involving part of Britain’s national debt and promoted expectations of enormous trade with Spanish America. Its shares rose dramatically during 1720 as investors chased profits and Parliament passed measures that restricted competing joint-stock ventures. The company’s commercial prospects, however, could not justify the market price.
When confidence broke, the share price collapsed. Investors across social classes suffered losses, and the scandal damaged public trust in government finance and company promotion. Parliament investigated the episode, uncovering corruption and improper dealings involving some officials and directors.
The South Sea Bubble is often discussed alongside France’s Mississippi Bubble, which also collapsed in 1720. They were separate schemes, although both reflected early modern enthusiasm for speculative company shares, government finance, and overseas trade. The episode helped establish the phrase “bubble” as a lasting term for an unsustainable financial boom.