The South Sea Bubble was the 18th-century British speculative bubble in which South Sea Company shares soared before collapsing in 1720. The company had received government privileges connected with trade and the conversion of government debt.
Its shares rose dramatically as investors were encouraged by optimistic claims about the company’s commercial prospects. The company’s actual trade with Spanish America was far more limited than many participants expected, but speculation continued as new investors bought shares at rising prices.
Parliament passed the Bubble Act in June 1720, partly to restrict competing joint-stock companies. When confidence broke later that year, South Sea shares fell sharply, ruining many investors and causing a political scandal. Several directors and public figures were accused of corruption or improper conduct.
The South Sea Bubble is often discussed alongside John Law’s Mississippi Bubble in France. They were separate schemes in different countries, although both collapsed in 1720 and are classic examples of speculative manias. The episode also influenced later debates about corporate disclosure, public debt, and financial regulation.