Which company’s 1720 share collapse helped cause Britain’s South Sea Bubble scandal?

The South Sea Company’s 1720 share collapse caused the central scandal of Britain’s South Sea Bubble.

The company was established in 1711 and was given a monopoly over British trade with Spanish South America. In practice, wars and Spanish restrictions limited that trade, but the company’s government connections and debt-conversion plan encouraged investors to believe its prospects were enormous.

In 1720, the South Sea Company agreed to absorb large amounts of British government debt. Investors received opportunities to exchange debt for shares, and successive subscription schemes helped drive the price dramatically higher. The stock eventually collapsed, ruining many shareholders and exposing political influence and corruption.

The episode involved other speculative ventures, and Britain passed the Bubble Act in 1720 to restrict unauthorized joint-stock companies. The South Sea scandal is also discussed alongside France’s Mississippi Bubble, but the two involved different companies and governments. The Bank of England was involved in the financial environment, not the name of the failed speculative company.