Which 18th-century bubble burst in 1720 after shares of its namesake company soared in London?

The South Sea Bubble burst in 1720 after shares of the South Sea Company soared in London.

The South Sea Company was established in 1711 and received a monopoly over British trade with parts of Spanish South America in exchange for taking on government debt. In practice, the expected trade opportunities were far smaller than many investors imagined. Nevertheless, promotional excitement and speculation pushed the share price dramatically higher in 1720.

The company’s shares rose from about £100 in January 1720 to roughly £1,000 by August. Confidence then reversed, and the price collapsed to about £100 before the end of the year. Investors from different social classes suffered losses, and the scandal damaged trust in financial promoters and political leaders.

The South Sea Bubble occurred alongside John Law’s Mississippi Bubble in France, but they were separate schemes. Parliament responded with the Bubble Act of 1720, which restricted certain joint-stock companies. The episode remains one of the best-known early examples of speculative financial mania.