In 1717, the financial genius John Law founded the Mississippi Company to help France manage its enormous debt. He obtained a monopoly over the Louisiana colony from the French governnt and then began issuing company shares. Rumors of vast gold reserves in the Mississippi River valley, along with the company's acquisition of additional colonial rights, drove the stock price sky-high.
From an initial price of 500 livres per share, it surged to nearly 20,000 livres at its peak. Yes, that's not a typo—the stock price increased by 40 tis!
John Law saw this as an opportunity to solve France's 15 billion livres debt. Starting in 1719, he issued five additional stock offerings, using the skyrocketing stock prices and issuing banknotes from the Royal Bank to seemingly eliminate the governnt's debt overnight.
Of course, there was no way he could have actually earned 15 billion livres in just three years; all that money was simply a stock market bubble.
In 1720, as gold prospectors returned empty-handed and the myth of the Mississippi gold mines crumbled, the company's stock price collapsed. Panic selling ensued, driving the stock price down to below 200 livres.
France's then-ruler, the Regent Duke of Orleans, hastily revoked the company's privileges, leading to its bankruptcy. The bubble, worth tens of billions of livres—equivalent to over thirty years of France's total fiscal inco—burst overnight.
Countless people who had invested in the Mississippi Company were ruined, and France plunged into a severe economic crisis. Industry and comrce ca to a standstill, with agriculture barely surviving. This also fueled the rise of physiocracy, an economic theory advocating for the primacy of agriculture.
John Law fled to Brussels, leaving behind a nation in shambles. France took decades to recover from the disaster.
At the sa ti, Britain faced a similar crisis with the "South Sea Company," prompting the governnt to enact the Bubble Act, which imposed strict regulations on the public sale of shares.
France followed suit, requiring any company wishing to publicly issue stock to pass a cabinet review and receive royal approval. This process was so stringent that only one company was typically approved every few years, with strict oversight.
However, for Joseph, none of this posed a problem.
The Minister of Finance and the Minister of the Interior were already shareholders in Paris Angel Company, and the King and Queen were, of course, on his side.
Joseph assured the cabinet that Paris Angel's stock price wouldn't exceed the company's actual value by more than 30%, that only 40% of the total shares would be publicly offered, and that the company would buy back shares if the price fell below a certain level.
With all financial risks seemingly eliminated, King Louis XVI readily signed off on Paris Angel's public listing.
Joseph still had considerable leeway in manipulating the situation. What was the actual value of the company? With a store generating daily sales of 120,000 livres, a valuation of 5 million livres wouldn't be unreasonable, aning Paris Angel could easily be valued in the tens of millions.
Of course, Joseph didn't want to kill the goose that laid the golden eggs. Disrupting the stock market would harm everyone involved. After all, the Industrial Revolution required significant capital, and a healthy stock market was crucial for industrial developnt.
Besides, another Mississippi Company-style disaster could very well bring about a premature revolution.
In front of Paris City Hall, a wooden platform had been erected, standing about half a man's height.
The platform was decorated with colorful ribbons and wreaths, as if celebrating a festival. A banner overhead read "Paris Angel Company Stock Offering."
Chairs were set up around the platform, which also featured counters for stock traders and clerks from various banks.
The most striking feature was a large, smooth wooden board on the left, inscribed with the words "Transaction Records" at the top. This would display trading information.
The entire trading site covered an area equivalent to two modern soccer fields.
Thanks to John Law's shenanigans, the French were already wary of stock trading, and the country's stock exchanges were ghost towns—old, decrepit, and cramped.
So, Joseph had chosen to hold the offering outside City Hall.
At 10 a.m., as a lodious fanfare sounded, flower petals were tossed into the air. Brent stepped onto the platform and loudly announced, "Paris Angel Company is now officially offering shares to the public! Anyone can invest here."
An assistant quickly presented the docunt signed by the King, authorizing the sale of shares.
Then, one by one, City Hall officials took to the stage to offer their congratulatory remarks on Paris Angel's listing.
However, the investors had long grown impatient. Ignoring the officials, they surged toward the trading counters, shouting out the number of shares they wanted to buy. Brent was nearly knocked over in the rush.
Such a scene hadn't been seen in France for decades. Even when major banks issued stock, people were usually cautious, and only a few would buy in.
But Paris Angel had done an excellent job of preparing the ground. Not only had newspapers been filled with advertisents, but the new stores had popped up all over Paris. Everyone had seen the bustling construction with their own eyes.
Just yesterday, three new Paris Angel stores opened in Paris, drawing enormous crowds. Countless ladies erged from the stores with their purchases, their faces beaming with excitent and satisfaction.
There were even rumors of more Paris Angel stores opening in Reims, Marseille, and beyond—even in England.
Moreover, Paris Angel had promised to buy back shares if the price fell below 80% of the offering price and to prevent the stock price from exceeding the company's actual value by more than 30%.
Everything pointed to one conclusion: there would be no bubble with Paris Angel! It was risk-free!
Seeing how the stores were bustling with business, everyone was convinced that stock dividends would be generous. It was a rare investnt opportunity—so why not buy in?
Soon, an exchange employee wrote the first transaction on the record board:
Buy: Paris Angel Company, 2 livres, 30 shares, total 60 livres.
Imdiately followed by the second transaction:
Buy: Paris Angel Company, 2 livres, 105 shares, total 210 livres.
And then the third, fourth, and fifth transactions followed...
The Paris Police Departnt had dispatched over sixty officers to maintain order at the trading site, barely preventing chaos. Nearby journalists watched wide-eyed, docunting the astonishing scene.
At 9 p.m., Brent and Joseph's personal accountant arrived at Versailles, brimming with excitent.
In the Prince's reception room, Brent, with trembling hands, handed a report from the exchange to Joseph.
The accountant, equally thrilled, exclaid, "Your Highness, a total of 773,000 shares were sold, amounting to 1,550,000 livres!"
The only limiting factor was that stock transactions in this era were all done manually, making the process extrely slow. The traders could handle a maximum of 2,000 transactions a day, or just over 70,000 shares.
Although the square outside City Hall was packed with people eager to buy shares, only those who had arrived early were able to complete their transactions.
Joseph praised Brent and then calmly instructed, "Transfer all the funds to the French Reserve Bank. As I said before, you don't need to report back to until the funds reach 6 million livres."
(End of Chapter)
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