The South Sea Bubble was the British investment mania that collapsed in 1720.
The South Sea Company received a government-backed monopoly over trade with Spanish South America, although its actual commercial opportunities were much smaller than many investors imagined. In exchange for taking on government debt, the company issued shares and promoted expectations of enormous future profits.
Share prices rose rapidly during 1720. A broader rush into speculative companies followed, and Parliament passed the Bubble Act to restrict companies operating without a charter. When confidence weakened, South Sea shares plunged, ruining many investors and causing a political scandal. Parliamentary investigations found corruption involving company directors and public officials.
The South Sea Bubble is often grouped with John Law’s Mississippi Bubble in France, which also burst in 1720. They were separate schemes in separate countries, although their collapses formed part of the same European wave of speculative finance.