Now a single share won't buy you lunch. The stock caught fire, and at one point the company had a market capitalization bigger than the largest three U.S. airlines combined. The list of story stocks is endless. The bubble initially was funded by venture capitalists. They serve as theater producers, auditioning new acts and then taking them on the road.
Venture capitalists have no such reservations.
But punters in the stock market got over their qualms. Gurley noted that the average time from seed funding to IPO dropped from 6.5 years to 2.5 in the late 1990s. Up until early last year, many investors were falling all over themselves to get a piece of these untested acts. And once a story stock catches fire, it often gains juggernaut-like momentum. According to Soros' Theory of Reflexivity, companies can use inflated expectations to issue new stock at inflated prices, and the resulting increase in earnings per share then validates the inflated expectations.