Paul Helen in his The South Sea Bubble: A History of its Origins and Consequences said that as a result of the Peace of Utrecht, “The South Sea Company in turn become the beneficiary of the Asiento” …show more content…
Parliament encouraged the trade of South Sea Company shares by simplifying the process to convert government bonds into stock. A common theme among city tradesman was converting their holdings of government debt into South Sea Company stock because it appeared to be a more profitable option (Carswell 54). Historian and economist Richard Dale explains the reasoning behind investments, “holders of redeemable debt… debts [that] could be after all repaid by the government at par at any time. Accordingly, the company valued the redeemable debt at a par plus 5 percent [meaning] that investors would gain on the conversion” (Dale 119). The investment enticing terms of the debt conversion gave investors a viable reason to transfer their debt into South Sea Company stock. As a result of all the debt conversions, analysts estimate that the stock price in August 1720 climbed to over five times its expected market capitalization (Dale, Johnson, Tang 239). Through early forms of lobbying, the South Sea Company achieved royal and parliamentary support by enticing the legislator with financial incentives to pass favorable legislation. Members of Parliament including, “Aislabie [a key member of parliament]… had been credited with fictitious South Sea stock at a favorable price which