The South Sea Bubble burst in London in 1720 after the South Sea Company’s share price collapsed.
The South Sea Company received a government charter connected with the trade and conversion of government debt. Investors became excited by exaggerated expectations about the company’s commercial prospects, particularly its supposed access to profitable trade with Spanish America. Its shares rose dramatically during 1720, attracting both wealthy investors and members of the public.
The boom encouraged the creation of other ventures and speculative schemes. Parliament passed the Bubble Act in June 1720, partly in response to unauthorized companies, but the measure did not prevent the South Sea Company’s rise. As confidence weakened and investors sold, the share price collapsed later that year, ruining many participants and damaging public trust.
The South Sea Bubble is often discussed alongside the Mississippi Bubble in France and the earlier Dutch tulip mania. These episodes are not identical: the South Sea event centered on company shares and government debt, while tulip mania involved contracts and bulbs. Together they are classic examples of speculative bubbles.