|
More well known than The South Sea Company is perhaps the "South Sea Bubble" (1711 - September 1720) which is the name given to the economic bubble that occurred through overheated speculation in the company shares during 1720. The price collapsed the same year after reaching a peak in September. Hogarthian image of the South Sea Bubble by EM Ward, Tate Gallery File links The following pages link to this file: The South Sea Company Edward Matthew Ward Categories: Public domain art ...
Hogarthian image of the South Sea Bubble by EM Ward, Tate Gallery File links The following pages link to this file: The South Sea Company Edward Matthew Ward Categories: Public domain art ...
E.M. Ward, The South Sea Bubble (1846), a Hogarthian subject in the Tate Gallery Edward Matthew Ward (1816-1879) was a Victorian narrative painter best known for his murals in the Palace of Westminster depicting episodes in British history from the English Civil War to the Glorious Revolution. ...
The Tate Gallery in the United Kingdom is a network of four galleries and a virtual presence: Tate Britain (opened 1897), Tate Liverpool (1988), Tate St Ives (1993), Tate Modern (2000) and Tate Online (1998). ...
// Events February 24 - The London premiere of Rinaldo by George Friderich Handel, the first Italian opera written for the London stage. ...
// Events January 6 - The Committee of Inquiry on the South Sea Bubble publishes its findings February 11 - Sweden and Prussia sign the (2nd Treaty of Stockholm) declaring peace. ...
Currier & Ives print on economic bubbles, 1875. ...
Speculation involves the buying, holding, and selling of stocks, bonds, commodities, currencies, collectibles, real estate, derivatives or any valuable thing to profit from fluctuations in its price as opposed to buying it for use or for income ( via dividends, interest etc). ...
Initial stages The company, formed in 1711 by Robert Harley, was granted exclusive trading rights in Spanish South America. The trading rights pre-supposed the successful conclusion of the War of the Spanish Succession, which did not end until 1713, and the actual granted treaty rights were not as comprehensive as Harley had originally hoped. In return for these rights, the company took on around £10 million of government bonds, exchanging them with the bondholders for stock in the company at 6% interest. Robert Harley, 1st Earl of Oxford and Mortimer (5 December 1661 - 21 May 1724), was an English statesman of the Stuart and early Georgian periods. ...
South America South America is a continent crossed by the equator, with most of its area in the Southern Hemisphere. ...
Charles II was the last Habsburg King of Spain. ...
// Events April 11 - War of the Spanish Succession: Treaty of Utrecht June 23 - French residents of Acadia given one year to declare allegiance to Britain or leave Nova Scotia Canada first Orrery built by George Graham Ongoing events Great Northern War (1700-1721) War of the Spanish Succession (1702-1713...
The pound sterling is the official currency of the United Kingdom (UK). ...
A government bond is a bond issued by a national government denominated in the countrys own currency. ...
See stock (disambiguation) for other meanings of the term stock In financial terminology, stock is the capital raised by a corporation, through the issuance and sale of shares. ...
The company did not undertake a trading voyage to South America until 1717 and made little actual profit. Furthermore, when ties between Spain and Britain deteriorated in 1718 the short-term prospects of the company were very poor. Nonetheless, the company continued to argue that its longer-term future would be extremely profitable. In 1717 the company took on a further £2 million of public debt. // Events January 4 — The Netherlands, Britain & France sign Triple Alliance February 26-March 6 What is now the northeastern United States was paralyzed by a series of blizzards that buried the region. ...
// Events July 21 - Treaty of Passarowitz signed November 22 - Off the coast of Virginia, English pirate Edward Teach (best known as Blackbeard) is killed in battle when a British boarding party cornered and then shot and stabbed him more than 25 times. ...
This page is a candidate to be copied to Wiktionary. ...
Buying the public debt In 1719 the company proposed a scheme by which it would take on the entire remaining national debt of Britain (£30,981,712), offering its own stock at 5% in exchange for government bonds in a deal lasting until 1727. The Bank of England proposed a similar deal. The company hoped to make a considerable profit and did much to advertise the proposal which was accepted in a slightly altered form in April, 1720. The Chancellor of the Exchequer, John Aislabie, was a strong supporter of the scheme. Government debt (public debt, national debt) is money owed by government, at any level (central government, federal government, national government, municipal government, local government, regional government). ...
Events June 11 - George, Prince of Wales becomes King George II of Great Britain. ...
The Bank of England is the central bank of the United Kingdom, sometimes known as The Old Lady of Threadneedle Street or The Old Lady. The Bank of England // Functions of the Bank It performs all the recognized functions of a central bank -- to maintain price stability, and subject to...
// Events January 6 - The Committee of Inquiry on the South Sea Bubble publishes its findings February 11 - Sweden and Prussia sign the (2nd Treaty of Stockholm) declaring peace. ...
The Rt. ...
John Aislabie (December 4, 1670- June 18, 1742) was a British politician, notable for his involvement in the South Sea Bubble and for creating the water garden at Studley Royal. ...
The total government debt in 1719 was £50 million:
- £18.3m was held by 3 large corporations.
- Privately held redeemable debt amounted to £16.5m.
- £15m consisted of irredeemable annuities, long fixed-term annuities of 72-87 years and short annuities of 22 years remaining maturity.
The company acquired 85% of the redeemables and 80% of the irredeemables. Interest paying government debt to the company was now approximately £35.2 million (9.5+14+11.7). The British East India Company, sometimes referred to as John Company, was a joint-stock company of investors, which was granted a Royal Charter by Elizabeth I on December 31, 1600, with the intent to favour trade privileges in India. ...
The company then set to talking up its stock with "the most extravagant rumours" of the value of its potential trade, and there was an enormous wave of "speculating frenzy". The share price had risen from the time the scheme was proposed: from £128 in January 1720, to £175 in February, £330 in March and, following the scheme's acceptance, to £550 at the end of May.
What may have increased its valuation was that it was known to the market that a fund of credit of £70 million available for commercial expansion which had been made available through substantial support, apparently, by Parliament and the King.
Bubble Act A number of other joint-stock companies then joined the market, making usually fraudulent claims about other foreign ventures or bizarre schemes, and were nicknamed 'bubbles'.
In June, 1720, the Bubble Act (repealed in 1825) required all joint-stock companies to have a Royal Charter. The grant of a charter to the South Sea Company was an added boost, its shares leaping to £890 in early June. This peak encouraged people to start to sell; to counterbalance this the company's directors ordered their agents to buy, which succeeded in propping the price up at around £750. The Bubble Act of 1720 was an English act that forbade all joint-stock companies not authorised by royal charter. ...
1825 was a common year starting on Saturday (see link for calendar). ...
In the United Kingdom and Canada a Royal Charter is a charter granted by the Sovereign on the advice of the Privy Council, which creates or gives special status to an incorporated body. ...
Top reached The price finally reached £1,000 in early August and the level of selling was such that the price started to fall, triggering bankruptcies amongst those who had bought on credit and increased selling (i.e. short sellers). The price fell slowly throughout August down to around £700. The attempts by the company directors to talk up the price failed, and it continued to fall into September; the stockholders had lost confidence and a run started. Notice of closure stuck on the door of a computer store the day after its parent company, Granville Technology Group Ltd, declared bankruptcy (strictly, administration - see text) in the UK. Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay their creditors. ...
In finance, short selling is selling something that one does not (yet) own. ...
Also, in August 1720 the first of the installment payments of the first and second money subscriptions on new issues of South Sea stock were due. This may have created a liquidity squeeze and generated pressure to sell shares. Furthermore, the scramble for liquidity appeared internationally as "bubbles" were also ending in Amsterdam and Paris. The collapse coincided with the fall of the Mississippi Scheme of John Law in France. As a result, the price of South Sea shares began to decline. Amsterdam Location Country The Netherlands Province North Holland Population 739,295 (1 January 2005) Coordinates 4°54´E 52°22´N Website www. ...
MRS BITTEN IS A LESBIAN The Eiffel Tower has become a symbol of Paris throughout the world. ...
In August 1717 Scottish businessman John Law acquired a controlling interest in the then derelict Mississippi Company and renamed it the Compagnie d’Occident (or Compagnie du Mississippi). ...
There have been a number of famous individuals named John Law: John Law (economist) John Law (sociologist) John Law is also the name of a single by Dropkick Murphys. ...
By the end of September the stock had fallen to £150. The company failures now extended to banks and goldsmiths as they could not collect loans made on the stock, and thousands of individuals were ruined (including many members of the aristocracy). With investors outraged, Parliament was recalled in December and an investigation began. Reporting in 1721, it revealed widespread fraud amongst the company directors. Robert Walpole, who had argued against the scheme from the beginning, was forced to introduce a series of measures to restore public confidence. A bank is an institution that provides financial service, particularly taking deposits and extending credit. ...
A goldsmith creating a new ring A goldsmith is a metalworker who specializes in working with precious metals, usually to make jewelry. ...
The Ancient Greek term aristocracy meant a system of government with rule by the best. This is the first definition given in most dictionaries. ...
The Houses of Parliament, seen over Westminster Bridge The σParliament of the United Kingdom of Great Britain and Northern Ireland is the supreme legislative institution in the United Kingdom and British overseas territories (it alone has parliamentary sovereignty). ...
The Right Honourable Sir Robert Walpole, 1st Earl of Orford, KG , GCB , PC, ( 26 August 1676–18 March 1745 ) was a British statesman who is generally regarded as having been the first Prime Minister of Great Britain. ...
Valuation For the purposes of valuation, stock holders are primarily concerned with the future cash flow (dividends and capital gain) on which the stock provide a claim. Valuation is thus dependent on future expectations, and a company does not necessarily require positive earnings or cash flow to be highly valued. The valuation of the South Sea Company was perhaps nothing outrageous - it likely had financial ratios similar to those of many publicly traded companies today for which investors have high expectations. A shareholder or stockholder is an individual or company (including a corporation), that legally owns one or more shares of stock in a joint stock company. ...
A dividend is the distribution of profits to a companys shareholders. ...
In finance, a capital gain is profit that is realized from the sale of an asset that was previously purchased at a lower price. ...
A financial ratio is a ratio of two numbers of reported levels or flows of a company. ...
A publicly traded corporation often refers to a company whose shares are traded on the open market, such as a stock market. ...
An £8 million annual profit would perhaps justify a market cap of £200 million, if the earnings are "discounted" with a discount rate (an interest rate used in determining the present value of future cash flows) of 4% (200 * 0.04 = 8). This would be a 7% return on tangible assets (= 8 / 107). That would give the stock a PE ratio of 25 (= 200 / 8), above the mean, but nothing unusual. The term discount rate is used in several different contexts: mathematical discount rate, monetary policy, and project valuation. ...
In finance, the PE ratio of a stock (also called its earnings multiple, just multiple, or P/E) is used to measure how cheap or expensive share prices are. ...
Share price South Sea share price (in £): - 1720 January: 128
- 1720 1 February: 75
- 1720 March: 330
- 1720 May: 550
- 1720 July: 950
- 1720 August: 1000
- 1720 31 August: 775
- 1720 11 October: 290
- 1720 September: 150
February 1 is the 32nd day of the year in the Gregorian Calendar. ...
August 31 is the 243rd day of the year in the Gregorian calendar (244th in leap years), with 122 days remaining, as the final day of August. ...
October 11 is the 284th day of the year (285th in Leap years). ...
Restructuring The business would later be restructured, and a company with the name The South Sea Company stayed in business until the 1850s. // Events and Trends Technology Production of steel revolutionised by invention of the Bessemer process Benjamin Silliman fractionates petroleum by distillation for the first time First transatlantic telegraph cable laid First safety elevator installed by Elisha Otis Science Charles Darwin publishes The Origin of Species, putting forward the theory of evolution...
Quotes on the bubble - "I can calculate the movement of the stars, but NOT the madness of men." - Sir Isaac Newton, after losing a fortune (£20,000) in the bubble.
Sir Isaac Newton, PRS (25 December 1642 (OS) – 20 March 1727 (OS) / 4 January 1643 (NS) – 31 March 1727 (NS)) was an English physicist, mathematician, astronomer, inventor, philosopher and alchemist. ...
See also In August 1717 Scottish businessman John Law acquired a controlling interest in the then derelict Mississippi Company and renamed it the Compagnie d’Occident (or Compagnie du Mississippi). ...
This is a list of Stock market crashes. ...
External links |
Feeds |
Contact