This Day In Market History: The South Sea Co. Charters

Each day, Benzinga takes a look back at a notable market-related moment that occurred on this date.

What Happened? On this day in 1711, the South Sea Co. was chartered in London.

Where The Market Was: The rise and fall of the South Sea Co. occurred well before the creation of the Dow Jones Industrial Average and the S&P 500.

What Else Was Going On In The World? In 1711, French troops occupied Rio de Janeiro. Alexander Pope’s “An Essay on Criticism” was anonymously published. A loaf of bread cost about one penny.

The South Sea Bubble: Financial market bubbles have been along well before the United States was even a country. While the Dutch tulip mania of the 17th century may be the most well-known example, the South Sea Co. was a similarly destructive bubble in the early 18th century with widespread ramifications in England.

The South Sea Co. was chartered in September 1711 as a trading company with routes to Latin America. It was a public-private and joint stocks company that was created in part to help consolidate and reduce the cost of national debt.

Buyers clamored for South Sea shares, sending the stock price skyrocketing by 800% in a matter of months in 1720. Then, in a period of just a few weeks, the value collapsed by 80%. A number of people were financially ruined by the bubble, and the British economy was severely impacted.

After a restructuring, the South Sea Co. continued to operate for more than a century following the bursting of the bubble.

Photo: Edward Matthew Ward via Wikimedia.