(Re)financing the Slave Trade with the Royal African Company in the Boom Markets of 1720

In 1720, subscription finance and its attendant financial policies were highly successful for the Royal African Company. The values of subscription shares are easily understandable using standard elements of derivative security pricing theory. Sophisticated provision for protection of shareholder wealth made subscription finance successful; its parallels with modern innovated securities are demonstrated. A majority of Company shareholders participated in the re-financing, but could provide only a small portion of the new equity required. The re-financing attracted to the subscription an investment class that was strongly composed of parliamentary and aristocratic elements, but appeared to be only weakly attractive to persons who had already invested in the East India Company and was not attractive at all to Bank of England investors or to those persons who were investing in newly created marine insurance companies. Subsequent trade in subscription shares was more intense than was other share trading during the South Sea Bubble, but professional financial intermediaries did not form densely connected networks of trade that were the hallmarks of Bank of England and East India Company share trading. The re-financing launched an only briefly successful revival of the Company’s slave trade.