The South Sea Bubble was the 1720 speculative collapse involving Britain’s South Sea Company.
The company received a government-backed monopoly over trade with Spanish South America, although its practical trading opportunities were limited. Its shares soared as investors were encouraged by promotional claims, political connections, and easy access to credit. When confidence weakened, the price collapsed before the end of 1720.
The episode was part of a broader European speculative wave. France’s Mississippi Company also experienced a major bubble in 1720, and investors in Britain bought shares in many ventures described as “companies for carrying on an undertaking of great advantage, but nobody to know what it is.” The phrase captured the era’s frenzy.
The crash ruined many investors and caused a political scandal because prominent officials and company insiders had benefited. Parliament responded with the Bubble Act of 1720, which restricted the creation of joint-stock companies without a royal charter or parliamentary authorization. The South Sea Bubble is therefore both a market crash and a landmark in the history of financial regulation.