The Bubble Act

    The South Sea Company successfully triggered a speculative mania for its shares in 1720, with stock prices burst from £128 on January, £330 on March, £550 on May and gone up to the highest (forward) stock price £1050, recorded on 25 June. The south sea company share has increased at least 700% during the short period. The south sea company was able to support unusually high valuations as a result of a £70 million fund of credit that was granted by Parliament for the purpose of commercial expansion (more information, here).

South Sea Company shares fluctuation in 1720

    In fact, Many investors became unbelievable wealthy almost overnight as their shares rose rapidly. Until the Parliament of Great Britain has passed the Bubble Act, it burst on the autumn of 1720 in London. When the managers realized that their company was not making much benefit from its operations so that they sold their stocks in the summer of 1720 and hoped no one would leak the failure of the company to the other investors. Eventually, bad news spread to public, Panic selling immediately ensued as investors dumped the south sea company's shares, fortunes lost like a heartbeat. Thereafter South Sea Company shares devaluate dramatically to £520 on September, £290 at the beginning of October and a low price £170 in the mid October, the Bubble had bust. Even sir Issac Newton also lost over 20,000 pounds(equivalent to about £268 million in present day value) due to speculation in the south sea company share.....