The South Sea Bubble centered on the South Sea Company’s trading and debt-conversion scheme in Britain.
Founded in 1711, the South Sea Company received rights connected with British trade in Spanish South America. Its more important financial role was converting government debt into company shares. In 1720, political support and promotional claims helped drive its share price to extraordinary levels.
Investors bought shares amid widespread speculation, and the price rose far beyond what the company’s actual trading prospects could justify. When confidence broke, the shares collapsed. The losses damaged investors, merchants, and members of the political establishment, producing a major British financial scandal.
The South Sea Bubble is often discussed alongside France’s Mississippi Bubble and the Dutch tulip mania. Those episodes were separate events. The South Sea episode involved a joint-stock company, government debt, overseas-trade expectations, and intense share speculation.