The 1720 speculative episode that caused the South Sea Company’s share price to collapse in Britain was the South Sea Bubble.
The South Sea Company received valuable trading privileges and assumed part of the British national debt. Promotional claims about wealth from trade with Spanish America encouraged investors to buy shares, and the price rose dramatically during 1720. The company’s real commercial prospects were far less impressive than the expectations surrounding it.
As confidence weakened, investors rushed to sell. The collapse damaged many shareholders and prompted parliamentary investigations into corruption and insider dealing. The episode occurred alongside France’s Mississippi Bubble, but they were separate schemes with different companies and political settings.
The South Sea Bubble is often remembered as one of the earliest major financial bubbles in Britain. Its story helped establish the lasting idea that rapidly rising prices, borrowed money, and exaggerated promises can create a dangerous separation between market value and underlying business activity.