The South Sea Bubble collapsed in 1720 after shares of the South Sea Company lost most of their value.
The South Sea Company was granted a monopoly over British trade with Spanish South America, although its actual trading opportunities were far more limited than investors expected. In Britain, political connections and optimistic promotion helped drive its share price sharply higher.
The company’s shares rose from about £100 at the start of 1720 to nearly £1,000 in August. As confidence weakened, prices fell rapidly. Investors rushed to sell, and the collapse damaged many fortunes and exposed questionable promotion and insider dealing.
The South Sea Bubble occurred alongside John Law’s Mississippi Bubble in France, which is why the two episodes are often mentioned together. Tulip mania, another famous speculative episode, occurred much earlier in the Dutch Republic and involved tulip bulbs rather than a publicly traded company on the same scale.