Bubble Company


DEFINITION of 'Bubble Company'

A company whose valuation greatly exceeds that suggested by its fundamentals. The first well-documented bubble company was the South Sea Company, which caused the South Sea Bubble in 1720. A bubble company arises when speculators continuously buy up the stock in expectation of increased future earnings. However, bubble company shares often become worthless once the speculative bubble bursts.

BREAKING DOWN 'Bubble Company'

One common characteristic of a bubble company is scandal. For example, during the dotcom bubble many internet-based firms traded at high multiples under the expectation of generating high levels of future growth. When earnings did not meet analysts' expectations, many firms began to cook the books in order to manipulate their bottom lines. Once the internet bubble burst, the individual bubble companies either went bankrupt or experienced massive drops in their share prices.

  1. Tulipmania

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  2. Mississippi Company

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  3. Dutch Tulip Bulb Market Bubble

    One of the most famous market bubbles of all time, which occurred ...
  4. Housing Bubble

    A run-up in housing prices fueled by demand, speculation and ...
  5. Speculative Bubble

    A spike in asset values within a particular industry, commodity, ...
  6. Contagion

    The spread of market changes or disturbances from one region ...
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