Which 18th-century bubble burst in 1720 after shares of the South Sea Company soared?

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

The South Sea Company was founded in Britain in 1711 and received a government-backed monopoly over trade with parts of Spanish America. Investors also expected the company to profit from managing government debt. Those expectations helped drive an extraordinary rise in its share price during 1720, even though its realistic commercial prospects were much more limited.

Speculation spread through London, and new investors entered as prices climbed. When confidence turned, the share price collapsed. Many investors suffered severe losses, and the scandal damaged trust in financial promotion and corporate governance. Parliament investigated the affair, and several directors were accused of corruption.

The South Sea Bubble is often discussed alongside the Mississippi Bubble in France, which also burst in 1720. They were separate schemes, although both reflected the same era’s enthusiasm for company shares, credit, and speculative wealth. The episode helped establish “bubble” as a lasting term for an unsustainable financial boom.