Which company’s stock-market bubble burst in 1720 during Britain’s South Sea Bubble?

The South Sea Company’s stock-market bubble burst in 1720 during Britain’s South Sea Bubble.

The company was founded in 1711 and received a monopoly over trade with Spanish South America in exchange for helping manage British government debt. Investors became enthusiastic about the company’s supposed commercial prospects, even though the practical trading opportunities were far more limited than promotional claims suggested.

Its shares rose dramatically as speculation spread. The company also encouraged further investment through plans that allowed people to subscribe for shares using installments, drawing in wealthy investors and members of the political establishment. When confidence failed, the shares collapsed, ruining many investors and causing a political scandal.

The Mississippi Company in France experienced a related bubble at roughly the same time, which creates a frequent mix-up. Both episodes involved ambitious colonial-trade claims and financial speculation, but the British crash is named for the South Sea Company.