The South Sea Company was founded in 1711. It was granted exclusive trading rights to the Spanish colonies in South America in return for taking over the national debt of England, which was raised by the War of Spanish Succession.
Promoted as "a company for carrying out an undertaking of great advantage", speculation in the stock of the South Sea Company created an economic bubble in 1720, known as the South Sea Bubble.
The South Sea Company share price rose from £128 in January 1720 to over £1000 in June 1720. The rapid rise in share price caused a national frenzy, with all segments of society participating in the speculation as a variety of new joint-stock companies joined the market.
In order to ease the myriad of new joint-stock companies entering the market making fraudulent claims, the Royal Exchange and London Assurance Corporation Act 1719 or "Bubble Act" was passed in June 1720, requiring all joint-stock companies to receive a royal charter.
Shortly after the Bubble Act was passed, investor confidence began to fade and the sell off in South Sea Company stock caused a rapid collapse with the share price plunging to £150 by the end of September 1720. The company failure prompted an official investigation in 1721 which revealed widespread corruption amongst government and company officials.
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