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

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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 307 years ago, 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. Today, the Dow is trading at 25,916.45 and the S&P 500 is trading at 2,871.68.

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 percent in a matter of months in 1720. Then, in a period of just a few weeks, the value collapsed by 80 percent. 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.

Related Links:

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Image by Edward Matthew Ward via Wikimedia. 

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