The 1720 London financial panic followed the collapse of the South Sea Company’s shares and is known as the South Sea Bubble.
The company received a government-backed monopoly over trade with Spanish South America and promoted spectacular expectations, although its realistic trading prospects were limited. Share prices rose from about £100 in early 1720 to more than £1,000 that summer. Parliament’s Bubble Act and tightening credit contributed to the reversal, while insiders and imitators rushed to sell.
The collapse ruined many investors, including members of the British aristocracy. Parliament investigated bribery and corruption, and the scandal damaged public trust in joint-stock companies. France experienced a related episode in the Mississippi Company, but that was a separate bubble centered on John Law’s financial system. The South Sea crisis is an early example of speculative leverage, promotional hype, and contagion across markets.