The South Sea Bubble burst after the South Sea Company’s share price peaked in 1720.
The South Sea Company was established in 1711 and received a government-backed monopoly over British trade with parts of Spanish South America. In practice, its commercial prospects were far less impressive than promotional claims suggested. The company also attracted investors by converting government debt into shares.
Its stock price rose spectacularly during 1720, reaching about £1,000 per share before collapsing later that year. The decline ruined many investors and caused a political scandal because prominent figures had promoted or benefited from the scheme.
The South Sea Bubble occurred alongside the Mississippi Bubble in France, which was associated with John Law’s financial system. The two episodes are often discussed together, but they were separate schemes in different countries. Britain responded with restrictions on joint-stock companies through the Bubble Act of 1720.