Encyclopedia of Investment Terminology

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South Sea Bubble

The South Sea Bubble was a major economic bubble that occurred in 1720. Stock in the South Sea Company rose at a massive rate thanks to speculation in the value of the company following its full control over trading in the South American colonies that were held by Spain. Because of the massive confidence in the business, stock values went to nearly nine hundred pounds per share. However the South Sea Company ran out of money to pay off shares and forced people to buy shares that could only be bought by selling shares, thus causing the bubble to burst and shares to eventually fall to less than two hundred pounds per share.

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