Which British company’s share-price collapse became the central scandal of the South Sea Bubble?

The South Sea Company’s share-price collapse became the central scandal of the South Sea Bubble.

Founded in 1711, the company was granted a monopoly over British trade with Spanish South America. Its promoters also arranged a plan to take over a large portion of the national debt, persuading investors that the company had immense future value. In practice, its trading prospects were much smaller than the publicity suggested.

Speculation drove the share price to roughly £1,000 in 1720. When confidence broke, the price plunged, ruining many investors and exposing misleading promotion and political corruption. Several prominent public figures were implicated, and Parliament investigated the company’s conduct.

The South Sea episode is often grouped with the Mississippi Bubble in France, which collapsed in the same year. The two crises helped establish the enduring idea that rapidly rising prices can detach from the underlying value of an enterprise.