The Mississippi Company’s collapse formed the French side of the 1720 stock-market crash known as the Mississippi Bubble.
The company was associated with John Law, a Scottish financier who gained influence in France after proposing a bank based on paper money and a large trading corporation. The company claimed extensive rights connected with French Louisiana and other overseas commerce, helping generate excitement about its future profits.
Shares rose rapidly in 1719 and 1720 as investors bought into a system linking bank notes, public finance and company stock. The expansion of paper money and easy speculation pushed prices far beyond realistic values. When confidence weakened, holders rushed to exchange shares and notes for harder assets, producing a collapse.
The Mississippi Bubble is often discussed alongside Britain’s South Sea Bubble, which also burst in 1720. They were connected by the era’s speculative climate, but they were different companies in different financial systems. The episode damaged trust in paper money and John Law’s institutions.