In 1687, treasure hunter William Phips returned back from his very successful expedition in search of a sunken ship rumored to be full of diamonds and silver. The ship did have treasure, 32 tons of it. The investors that funded Phips’ journey received a 10,000% return on investment, setting off a wave of excitement in London’s investment community. There was an explosion in new “sea diving engine” companies that claimed to help treasure hunters stay under water for longer periods of time, theoretically making it easier to find treasure.
Almost all of these companies were fraudulent, and none ever replicated Phips’ original success. There was also an explosion in IPOs for non-diving related companies, such as the White Paper Company (which rose 3x in 4 years), the Linen Company, and other companies developing “technology” for strange things like “lights used to catch fish.” The crash in 1696 was epic in proportions. In 1693 there were 140 English & Scottish companies listed on the exchange. During the 1696 crash, 70% of those companies were wiped out.
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