The South Sea Bubble was the 1720 speculative bubble involving Britain’s South Sea Company.
The company received a government-backed monopoly over trade with Spanish South America and also took on substantial British government debt. Investors became excited as its share price rose rapidly, even though the company’s realistic trading prospects were far less impressive than public enthusiasm suggested.
South Sea Company shares climbed dramatically during 1720 before collapsing later that year. The episode ruined many investors and triggered investigations into corruption and insider influence. It also occurred alongside the Mississippi Bubble in France, another major speculative episode of the same period.
The South Sea Bubble was not a modern exchange crash in exactly the same institutional setting as the Wall Street crashes of 1929 or 1987. Nevertheless, it is one of the clearest early examples of a publicly traded company’s speculation inflating prices and then causing a severe financial collapse.