The South Sea Company was at the center of Britain’s 1720 stock-market collapse known as the South Sea Bubble.
Founded in 1711, the company received a government-backed monopoly over British trade with parts of Spanish South America. In practice, the expected commercial opportunities were far smaller than many investors imagined. The company also took on government debt, and its shares became the focus of intense speculation.
Its share price rose dramatically in 1720 before collapsing later that year. Investors borrowed to buy shares, while promoters encouraged the belief that extraordinary profits were imminent. When confidence broke, prices plunged and many investors faced severe losses.
The South Sea Bubble was part of a wider speculative episode. France’s Mississippi Company experienced a comparable collapse, and Britain passed the Bubble Act in response to the proliferation of questionable joint-stock schemes. The South Sea Company did not cause all of Europe’s 1720 speculation, but it gave the British crisis its best-known name.