The South Sea Company became famous for the South Sea Bubble, one of Britain’s earliest major stock-market crashes.
Founded in 1711, the company received a monopoly over British trade with Spanish South America in exchange for helping manage government debt. Its commercial prospects were exaggerated, and investors were encouraged to buy shares as prices rose dramatically during 1720.
The bubble burst later that year, ruining many investors and exposing political corruption connected with the promotion of the shares. Parliament investigated the scandal, and several directors were punished. The Mississippi Company bubble in France occurred in the same broad period, but it was a separate scheme associated with John Law. The South Sea episode helped establish “bubble” as a lasting term for speculative market manias.