The markets are not perfectly rationale nor perfectly efficient.
Example: In 2000 3-Com spun off a minority stake of its Palm division (maker of the Palm Pilot). For a while the market cap of Palm exceeded that of 3-Com, notwithstanding the fact that 3-Com owned the majority of Palm. The market was essentially assigning a negative equity value to 3-Com.
In a perfectly rationale market, arbitrageurs would buy 3-Com and sell short Palm.
I remember that very clearly, owning shares of 3Com myself in 2000. The company said that they would eventually give shares of Palm to 3Com share holders and even announced the ratio of X Palm shares to Y shares of 3Com. But they woud first release a small percentage of Palm to the public as an IPO.
The first day that Palm started to trade as a public company, the market went wild and bid it to a level where it would be cheaper to buy the same shares in 3Com. It means the rest of 3Com has negative value as YTG described.
I checked and checked my arithmetic, then scratched my head asking how the public could be so stupid. Arbitraging by shorting Palm and go long 3Com would be safe, but as Palm just started trading, it would not be so easy as there were not so many shares out there.
The next day, the "market" realized its mistake, and the prices of the 2 stocks returned to a more reasonable ratio.
Yes, it is not easy to make money from market inefficiencies.
It is still no excuse for the people who clamored for Palm shares to not understand that ownership of 3-Com shares would eventually get them the spun-off Palm shares a lot cheaper.
I should have taken that as a sign the tech mania was at its peak, and should have gotten completely out. I eventually got out of all tech stocks, but way past their peaks.
"Please God, just one more bubble" - Anon. (seen on a bumper sticker)
