The Mississippi Company was at the center of the Mississippi Bubble, an early stock-market crash in France.
The company received a monopoly over trade and development in French Louisiana and other commercial privileges under John Law’s financial system. Law also promoted the use of paper money and linked the company closely with France’s public finances. Confidence in the scheme pushed its shares sharply higher in 1719 and 1720.
Investors bought shares partly because they believed the company’s American prospects were enormous. In reality, the colony’s population, trade, and immediate profits could not justify the extreme expectations. As holders tried to convert paper wealth into coin, confidence broke down and the share price collapsed during 1720.
The Mississippi Bubble is often paired with Britain’s South Sea Bubble, which burst around the same time. They were separate schemes, however. The South Sea Company was British, while the Mississippi Company operated within John Law’s French financial system. The collapse damaged public trust in paper money and speculative finance, although France’s system was more complicated than a simple modern stock exchange.