Imagine that you were asked to invest in a company based purely on its sales growth over the past year. Never mind profits: there aren’t any. The pitch is that, since net revenues grew by about 50 per cent last year, you should, therefore, pay a multiple of about 50 times last year’s sales. The theoretical price/sales growth ratio, after all, would be about one: fair value!

This, or something very like it, is the trick that New York underwriters have pulled off with the initial public offering of Renren, aka “China’s Facebook”. That they got away with it speaks volumes about the hysteria surrounding Chinese technology stocks.

Sold at $14 a share, the top of its indicative range, Renren will achieve an equity valuation of 72 times last year’s revenues, which grew by 64 per cent. Not only is this price/sales multiple extraordinarily rich, in relative terms – well ahead of the 25 times implied by Goldman Sachs’ recent investment in the real Facebook, and higher than 268 of the 269 US-listed Chinese stocks which have reported comparable figures. It also seems a stretch for a single-market company that has only just broken even on an operating basis, facing a constantly shifting competitor set. Tencent’s Pengyou, a rival real-name social networking site, is gaining traction among students and white-collar workers; Alibaba and Baidu (with Facebook?) are also beginning to stir.