Why the Huge Valuations for Internet Companies?

People who have an interest in driving up the prices of stocks understand that financial value cannot be made to exceed economic value for very long. Generally, accurate information about the company will emerge, its economic value can then be determined, and if the share price is too high, it will fall. Hence, to get and hold a financial price, it must be made to appear that the economic price is at that level. To inflate financial value over real value requires that real value be measured as more than it is, and there are often imaginative schemes to achieve this. In fact, this is a frequent practice in the capital markets.

For example, during the late 1980s, manufacturers spun off money-losing ...

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