Which stock exchange crash in 1720 was linked to the collapse of the South Sea Company?

The South Sea Bubble was the 1720 stock-market crash linked to the collapse of the South Sea Company.

The South Sea Company was founded in England in 1711 and received a government-backed monopoly over trade with Spanish South America, although its practical trading opportunities were far more limited than many investors believed. In 1720, Parliament approved a plan for the company to convert part of Britain’s government debt into shares, encouraging intense speculation.

The share price rose dramatically during the year, attracting investors from many social classes. As confidence weakened and selling spread, the price collapsed. The crash damaged investors, exposed corruption and led to political scandal in Britain. Parliament investigated the company’s directors and associates, while the government reorganized the debt arrangements.

The South Sea Bubble is often discussed together with France’s Mississippi Bubble, which also collapsed in 1720. They were separate schemes, though both showed how credit, promotion and unrealistic expectations could inflate share prices. The episode is an early landmark in the history of financial bubbles.