Great Britain’s stock exchange experienced the South Sea Bubble crash in 1720, often regarded as one of the first modern stock-market crashes.
The South Sea Company received a government-backed monopoly over trade with parts of Spanish America and proposed taking over much of Britain’s national debt. Its shares rose dramatically as investors expected enormous profits, even though the company’s realistic trading prospects were far more limited than the speculation suggested.
By late 1720, confidence broke. Investors rushed to sell South Sea Company shares and other heavily promoted stocks. Prices collapsed, ruining many shareholders and causing political scandal because lawmakers and influential figures had promoted or benefited from the scheme. Parliament investigated the affair, and the government reorganized the company’s remaining assets and obligations.
The episode occurred alongside France’s Mississippi Bubble, a related speculative collapse associated with John Law’s financial system. The two events are often discussed together, but the South Sea Bubble occurred in Great Britain and centered on the South Sea Company.