Which investment company’s collapse marked the bursting of the South Sea Bubble in 1720?

The South Sea Company’s collapse marked the bursting of the South Sea Bubble in 1720.

Founded in 1711, the company received a British government monopoly over trade with parts of Spanish South America, although its practical trading opportunities were far more limited than many investors imagined. The company’s shares became the focus of intense speculation, and promoters encouraged expectations of enormous profits.

Parliament approved a plan allowing the company to convert government debt into shares, helping prices rise rapidly. By late summer 1720, confidence broke down, prices fell, and many investors suffered heavy losses. The episode damaged public trust and led to investigations into corruption and insider dealing.

The South Sea Bubble is often discussed alongside France’s Mississippi Bubble, which collapsed in the same year. They were separate schemes, however. The South Sea episode is also an early example of how government connections, persuasive promotion, and speculative buying can inflate asset prices beyond realistic business prospects.