Case | HBS Case Collection | December 2007 (Revised December 2008)

The South Sea Company (A)

by David A. Moss, Eugene Kintgen and Agnieszka Rafalska

Abstract

In early 1720, the South Sea Company and the Bank of England were cometing for the right to issue new shares and to exchange those shares for government bons that were then in the hands of the public. The British government had already executed two such debt conversion with the South Sea Company. Most individuals who had converted bonds for shares in 1711 and 1719 had seen their South Sea shares appreciate in the meantime, and the government had lowered its debt servicing costs as a result of these two conversions. The conversion under consideration in 1720, however, would be ona much larger scale. In time, the South Sea Company won the bidding war, and the House of Commons approved its debt conversion plan. Now it was up to the House of Lords to approve or reject the deal.

Keywords: Borrowing and Debt; Debt Securities; Stock Shares; Financial Strategy; Bids and Bidding; Business and Government Relations; Banking Industry; Financial Services Industry; Great Britain;

Citation:

Moss, David A., Eugene Kintgen, and Agnieszka Rafalska. "The South Sea Company (A)." Harvard Business School Case 708-005, December 2007. (Revised December 2008.)