Have You Heard About SPACs?

by Rick Ackerman

What came to be known as the South Sea Bubble was so pumped up before it popped in 1720 that investors apparently viewed nearly every opportunity as a sure thing. The York Building Company, for one. After being purchased by the Hollow Sword Blade Company, it mutated into a provider of water to London, to a buyer of confiscated Jacobite estates in Scotland, to an insurance company. With this checkered past, the stock still soared from £1oo to £1000 in a single year. The South Sea Bubble itself involved slave trade and rights to conduct business with trading companies in the New World. Rich and poor alike were enticed to pour their savings into such ventures, ostensibly because they believed there was no way to lose. Even Isaac Newton, whose IQ supposedly was around 200, got suckered. He made a pile of money and cashed out when the bubble was in its early stages, but he plunged in again just before the bubble burst and lost everything he’d made — about $20 million in today’s dollars. Newton is said to have remarked, woefully, that “[he could] calculate the motions of the heavenly bodies, but not the madness of people.” How crazed were they? One inventive firm that went public in 1720 famously advertised itself as “a company for carrying out an undertaking of great advantage, but nobody to know what it is.” Suffice it to say, enough pigeons went for this pitch to make the company’s promoters rich. It is not known whether any of the company’s shares were in Newton’s portfolio.

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