The South Sea Company became central to the South Sea Bubble, which burst in 1720.
Founded in 1711, the company received a British government monopoly over trade with Spanish South America, although its real commercial prospects were far more limited than many investors believed. In 1720, Parliament approved a plan allowing the company to convert government debt into shares, helping drive a spectacular rise in its price.
Speculation spread through London, and numerous companies were promoted to take advantage of the enthusiasm. The Bubble Act, passed in June 1720, restricted unauthorized joint-stock companies, but it did not prevent the South Sea Company from collapsing later that year.
The South Sea episode is often paired with France's Mississippi Bubble, which also burst in 1720. They were separate schemes, although both demonstrated how promotional excitement, easy credit, and unrealistic expectations could inflate share prices.