The South Sea Bubble burst in 1720 and became a famous early market crash.
The South Sea Company was granted rights connected with British trade involving Spanish South America, although its realistic commercial prospects were far less impressive than the excitement surrounding its shares. The company also took on government debt, helping it gain political and financial importance.
Share prices rose dramatically during 1720 as investors expected enormous profits. Speculation spread beyond the company itself, and many people borrowed money or invested savings in rapidly rising schemes. When confidence weakened, selling accelerated and prices collapsed before the end of the year.
The crash ruined many investors and damaged public trust in financial promotion. Parliament investigated the company’s conduct, and prominent figures were accused of corruption. The South Sea Bubble is often discussed alongside France’s Mississippi Bubble, which also collapsed in 1720, but they were separate companies and episodes.