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Encyclopedia > Mississippi Company

In August 1717 Scottish businessman John Law acquired a controlling interest in the then derelict Mississippi Company and renamed it the Compagnie d'Occident [sic] (or Compagnie du Mississippi). Its initial goal was to trade and do business with the French colonies in North America, which included much of the Mississippi River drainage basin, and the French colony of Louisiana. The Mississippi Land Company was a land company formed in 1763 following the British victory in the French and Indian War (1754–1763). ... The Compagnie de lOccident was a French Crown corporation that existed from 1664 to 1667. ... This article is about the country. ... Jean Law John Law (bap. ... -1... For the river in Canada, see Mississippi River (Ontario). ... This article is about the U.S. State. ...


As he bought control of the company he was granted a 25-year monopoly by the French government on trade with the West Indies and North America. In 1719 the company acquired the Compagnie des Indes Orientales, the Compagnie de Chine, and other French trading companies and became the Compagnie des Indes (or Compagnie Perpétuelle des Indes). In 1720 it acquired the Banque Royale, which was founded by John Law as Banque Générale in 1716. The Caribbean or the West Indies is a group of islands in the Caribbean Sea. ... French and other European settlements in India. ... Headquarters Paris, France Central Bank of France Website banque-france. ... Headquarters Paris, France Central Bank of France Website banque-france. ...


Law exaggerated the wealth of Louisiana with an effective marketing scheme, which led to wild speculation on the shares of the company in 1719. Shares rose from 500 to 15,000 livres, but by summer of 1720, there was a sudden decline in confidence, and the price was back to 500 livres in 1721. By the end of 1720 the Regent Philippe II of Orléans dismissed Law, who then fled from France. Speculation involves the buying, holding, and selling of stocks, bonds, commodities, currencies, collectibles, real estate, derivatives or any valuable financial instrument to profit from fluctuations in its price as opposed to buying it for use or for income via methods such as dividends or interest. ... In financial markets, a share is a unit of account for various financial instruments including stocks, mutual funds, limited partnerships, and REITs. ... The livre tournois (or Tournoise pound) was a currency used in France, named after the town of Tours, in which it was minted. ... Regent, from the Latin, a person selected to administer a state because the ruler is a minor or is not present or debilitated. ... Philippe of Orléans Philippe II, Duke of Orléans, Philippe Charles (August 2, 1674 – December 2, 1723) called Duke of Chartres (1674–1701), and then Duke of Orléans (1701–1723) was Regent of France from 1715 to 1723. ...

Contents

Debt conversion

The number of outstanding shares of the company was probably around 500,000 in 1720. A stock price of 15,000 livres would have given the company a market capitalization of 7,500,000,000 livres. After the share price collapsed to 500 livres in September 1721, the company was valued at only 250,000,000 livres. As a comparison, the French government expenses was 150 million livres in 1700, while their debt in 1719 was 1.6 billion livres. Market capitalization, or market cap, is a measurement of corporate or economic size equal to the stock price times the number of shares outstanding of a public company. ...


With the demand for company shares being high, the government and John Law set out to buy back the whole 1.6 billion livres government debt for shares in the company. The plan was successful and in 1720 the whole government debt was acquired by the company, before the company's market capitalization began to collapse during 1720 and 1721. Compare this with the debt acquisition by The South Sea Company of England that acquired 80% of the 50 million pound government debt during 1720. The South Sea Company reached a highest share price of 1,000 pounds in August 1720, a few months later than the Compagnie des Indes. Hogarthian image of the South Sea Bubble, by Edward Matthew Ward, Tate Gallery The South Sea Company (1711 – c1850s) was an English company granted a monopoly to trade with South America under a treaty with Spain. ... For other uses, see England (disambiguation). ...


As the creditors bought shares in the company with their Bonds and debt papers, the whole government debt became property of the company (debt-for-equity transaction). And the company became property of the former creditors, but effectively controlled by the government. Primarily the government paid an annual 3% interest to the company, which amounted to 48 million livres. Through these transactions the French government had successfully unloaded their whole gigantic debt of 1,000% the annual budget (perhaps 200% - 400% of GDP) and was basically debt free. For alternative meanings, see bond (a disambiguation page). ... Debt restructuring is a plan for zoo, which is made to make possible to continue business operation without danger from lions. ...


Reopened in 1722

The company sought bankruptcy protection in 1721. It was reorganized and open for business in 1722. In 1723 it was granted fresh privileges by Louis XV. Among these were the monopoly of sale of tobacco and coffee, and the right to organise national lotteries. It could again tap the capital markets and raise capital by issue of shares and bonds. Notice of closure stuck on the door of a computer store the day after its parent company, Granville Technology Group Ltd, declared bankruptcy (strictly, put into administration—see text) in the United Kingdom. ... Louis XV, called the Beloved (French: le Bien-Aimé) (February 15, 1710 – May 10, 1774), ruled as King of France and Navarre from 1715 until his death. ... Shredded tobacco leaf for pipe smoking Tobacco can also be pressed into plugs and sliced into flakes Tobacco is an agricultural product processed from the fresh leaves of plants in the genus Nicotiana. ... For the several U.S. counties named Coffee, see Coffee County. ... A lottery is a popular form of gambling which involves the drawing of lots for a prize. ...


From 1726 to 1746 the company flourished from its overseas trade and domestic business. It brought wealth to the port cities it was operating from: in Bordeaux, Nantes, Marseille, and, in particular, its home port of Lorient (initially called L'Orient). During this period it lost its trading rights for the western hemisphere but it kept trading with the east and could prosper from that business. Its main goods of trade during the period were porcelain, wallpapers, lacquer and tea from China, cotton and silk cloth from China and India, coffee from Mocha, Yemen), pepper from Mahé (South India), gold, ivory and slaves from West Africa. City logo (traditional tri-crescent) City coat of arms Motto: The fleur-de-lis alone rules over the moon, the waves, the castle, and the lion Location Time Zone CET (GMT +1) Coordinates Administration Country Region Aquitaine Department Gironde (33) Intercommunality Urban Community of Bordeaux Mayor Alain Juppé (UMP) (since... Traditional city flag City coat of arms Motto: Favet Neptunus eunti (Latin: Shall Neptune favour the traveller) Location Coordinates Time Zone CET (GMT +1) Administration Country Region Pays de la Loire Department Loire-Atlantique (44) Mayor Jean-Marc Ayrault  (PS) (since 1989) City Statistics Land area¹ 65. ... City flag Coat of arms Motto: By her great deeds, the city of Massilia shines Location Coordinates Time Zone CET (GMT +1) Administration Country Region Provence-Alpes-Côte dAzur Department Bouches-du-Rhône (13) Subdivisions 16 arrondissements (in 8 secteurs) Intercommunality Urban Community of Marseille Provence M... This article is about The place Lorient in France. ... “Fine China” redirects here. ... Mary Cassatts painting of two ladies drinking tea in a room with red-blue striped wallpapers. ... In a general sense, lacquer is a clear or coloured coating, that dries by solvent evaporation only and that produces a hard, durable finish that can be polished to a very high gloss, and gives the illusion of depth. ... For other uses, see Tea (disambiguation). ... For other uses, see Cotton (disambiguation). ... For other uses of this word, see Silk (disambiguation). ... Painting of Mocha in 1692 Mocha (Arabic: المخا [al-Mukhā]) is a port city on the Red Sea coast of Yemen. ... Binomial name L. Black pepper (Piper nigrum) is a flowering vine in the family Piperaceae, cultivated for its fruit, which is usually dried and used as a spice and seasoning. ... For other uses, see Mahé (disambiguation). ... The geographical south of India includes all Indian territory below the 20th parallel. ... GOLD refers to one of the following: GOLD (IEEE) is an IEEE program designed to garner more student members at the university level (Graduates of the Last Decade). ... This article or section does not cite its references or sources. ... The Buxton Memorial Fountain, celebrating the emancipation of slaves in the British Empire in 1834, London. ...  Western Africa (UN subregion)  Maghreb[1] West Africa or Western Africa is the westernmost region of the African continent. ...


After 1746 the spendthrift policies of the French Government began to hurt the Company, and the Seven Years' War (1756–1763) brought severe losses. In February 1770 an edict required the Company to transfer to the state all its properties, assets and rights, then valued to just 30 million livres, while the King accepted to pay all the Company's debts and annuity (rente) obligations. The company was officially dissolved in 1770, although its liquidation dragged on into the 1790s. A Spendthrift is someone who spends money prodigally and is extravagant and recklessly wasteful. ... Combatants Kingdom of Prussia Kingdom of Great Britain and its American Colonies Electorate of Hanover Iroquois Confederacy Kingdom of Portugal Electorate of Brunswick Electorate of Hesse-Kassel Philippines Archduchy of Austria Kingdom of France Empire of Russia Kingdom of Sweden Kingdom of Spain Electorate of Saxony Kingdom of Naples and... An edict is an announcement of a law, often associated with monarchism. ... A property is an intrinsic or extrinsic quality of an object—where an object may be of any differing nature, depending on the context and field — be it computing, philosophy, etc. ... In business and accounting an asset is anything owned, whether in possession or by right to take possession, by a person or a group acting together, e. ... For the direction right, see left and right or starboard. ... Annuity contracts are offered by organizations and individuals that may accumulate value and take a current value and pay it out over a period of years. ... Liquidation, or winding up, refers to a business whose assets are converted to money in order to pay off debt. ...


Compagnie des Indes share price

  • 1719 May: 500 livres
  • 1720 February: 10,000 livres
  • 1721 September: 500 livres

Financials

When the whole debt was converted at the end of 1719 their 1720 financials may have looked like this: ([1])

Income Statement (in livres)
Period Ending 31-Dec-1720
Revenue
Collection of indirect taxes 15,000,000
Collection of other taxes 1,500,000
Tobacco 2,000,000
The mint 4,000,000
Trading 10,000,000
Interest income 48,000,000
Total 80,500,000
Expenses
 ?  ?
Net Income
 ?  ?
Balance Sheet (in livres)
Period Ending 31-Dec-1720
Assets
Government bonds 1,600,000,000
Liabilities
 ?  ?

See also

Jean Law John Law (bap. ... Hogarthian image of the South Sea Bubble, by Edward Matthew Ward, Tate Gallery The South Sea Company (1711 – c1850s) was an English company granted a monopoly to trade with South America under a treaty with Spain. ... bubbles are things that you make out of soap. ... Extraordinary Popular Delusions and the Madness of Crowds is a popular history of popular folly by Charles Mackay, first published in 1841. ...

External links

  • "The Compagnie des Indes" -)By Howard Shakespeare)
  • "Famous First Bubbles - Mississippi Bubble"
  • "Learning from past investment manias" -(AME Info FN)
  • "The South Sea Bubble and Law's Mississippi Scheme" -(from The Daily Reckoning)

 
 

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