The 18th-century speculative bubble that burst in 1720 and caused a major stock-market crash in Britain was the South Sea Bubble.
The South Sea Company received a government charter in 1711 and later gained rights connected with British trade in Spanish America. Investors became excited by exaggerated expectations about the company’s commercial prospects. Its shares rose rapidly in 1720, helped by a debt-conversion scheme that allowed the government to exchange some national debt for company stock.
Parliament passed the Bubble Act in 1720, restricting many companies that lacked royal charters or parliamentary authority. As confidence weakened, South Sea Company shares collapsed from their extraordinary summer levels. Investors, including members of the political and social elite, suffered severe losses.
The South Sea Bubble unfolded alongside John Law’s Mississippi Bubble in France. The two episodes are often discussed together because both combined state finance, aggressive speculation, and unrealistic expectations. South Sea shares did not represent the entire British economy, but the collapse damaged public trust in speculative ventures.