New valuation theories

In the DotCom era, new valuation theories emerged, e.g. “eye-ball valuation”

When the companies were not generating any profits, nor were reporting any sales, where was the value? New theories emerged. Any emergence of new technologies brings new way of thinking and the traditional thinking is discarded.

What happened was a massive rally in market prices of many of these stocks. There was no benchmark to compare whether the stocks were high priced or not, since the theory itself was new.

In most caes, the traditional theories turned out to be true – time-tested. The new theories soon gave way to the old. However, in 2007, we saw “foot-fall” valuations for the retail companies.

#RidingTheRollerCoaster – 57

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