Which company stood at the center of Britain’s 1720 South Sea Bubble collapse?
Answer
South Sea Company
The South Sea Company stood at the center of Britain’s 1720 South Sea Bubble collapse.
Founded in 1711, the company received a government-backed monopoly over British trade with parts of Spanish South America, although its realistic trading opportunities were much more limited than investors expected. In 1720, Parliament approved a scheme in which the company assumed part of the national debt. Its shares then rose dramatically as speculation spread through London.
The price collapsed later that year, ruining many investors and exposing bribery and misleading promotion. The company’s failure formed part of a wider European speculative episode that also included France’s Mississippi Company. Britain responded with investigations and legal measures, while the Bubble Act restricted the formation of joint-stock companies without a royal charter or parliamentary authorization. The episode is a classic early example of a speculative bubble followed by a market crash.