The South Sea Company was formed as a rival to the Bank of England, with the goal of managing the British government's debt. The company was given a monopoly on trade in the South Seas, but this was hindered by the fact that the British were at war with Spain, which controlled the major ports in the region. Despite this, the company's stock was heavily promoted, with claims of vast riches to be gained from trade in the South Seas.
The company's fortunes changed when the king died and George I came to power, leading to the Whigs regaining control of the government. John Blunt, a key figure in the company, adapted by replacing Tory board members with Whigs and getting the king's son to replace Harley as the company's governor.
The company's stock continued to rise, and it was allowed to issue more stock to manage the government's debt. The king even invested in the company himself. The company's valuation increased to the point where it was worth half the total value of all stock issued in England, despite having no discernible source of income.
As the company's stock price rose, it found itself paying for the debt it had taken on at a higher rate than expected, resulting in extra shares that it no longer needed. These shares were sold, and the profit was pocketed by the company.
Here are the key facts extracted from the text:
1. The South Sea Company was created to manage the British government's debt.
2. The company was given a monopoly on trading in the South Seas, specifically Central and South America.
3. The South Seas mentioned in the deal referred to major ports in Central and South America, which were exclusively owned by Spain.
4. Britain was at war with Spain at the time, but this did not deter Harley and Blunt from pursuing the venture.
5. The company was allowed to issue shares in exchange for government debt.
6. The government would pay the company roughly six percent interest on the debt, or about half a million pounds a year.
7. The company would use this money as a dividend for its investors.
8. The South Sea Company was also given the right to trade slaves in the South Seas.
9. The company was allowed to send one ship a year to each of the Spanish ports.
10. The Honourable East India Company was sending fleets of ships every month to maintain its profits.
11. The South Sea Company's business was not actually trading, but managing the government's debt.
12. In 1714, Queen Anne died without an heir, and George I was chosen by Parliament to succeed her.
13. With the new king, Harley fell out of favor, and the Whigs regained dominance.
14. Blunt replaced most of the Tory board members in the South Sea Company with Whigs.
15. The king's son, George II, replaced Harley as the largely ceremonial governor of the company.
16. The South Sea Company agreed to forgive the two years of interest the previous government had owed.
17. The government allowed the company to issue more stock of an equivalent value to offset the loss.
18. The company had roughly 10 million pounds of stock issued, which was about half the total value of stock issued by all companies in England.
19. The South Sea Company was allowed to handle the government's debt from the 1710 lottery.
20. In 1717, the king and his son, George II, got into a fight, and the king removed his son as governor of the South Sea Company.
21. The king replaced his son with himself as the royal figurehead of the company.
22. In 1719, there was a brief attempt to overthrow the king by the Jacobites.
23. The South Sea Company fueled the sense of jubilation spreading around England after the failed coup.
24. The company's stock price rose from 100 pounds to 114 pounds, and they sold extra shares they no longer needed to cover the debt and pocketed the profit.