Xero briefly became a more than $5 billion company on Thursday before a dose of reality appeared to wash over the market frenzy driving the stock higher.
The shares rose as high as $41.50 - which valued the company at $5.29 billion - in the morning but ended the day down $3.30 at $34. A year ago, Xero shares were trading at $5.45.
Fuelling the latest surge was Xero's announcement in mid-October that it had raised $180 million from investors, including American tech investor and billionaire venture capitalist, Peter Thiel.
The latest fund raising gave the company more than $230 million of cash on hand, plenty of money to fund accelerated growth.
Technology commentator Peter Griffin says this cash buffer is one of the things which distinguishes Xero from the many high flying tech stocks which crashed and burned after the turn of the century.
Mr Griffin says although the companies Xero is trying to supersede, such as MYOB in Australia and New Zealand and Intuit in the United States, have vast customer bases to market to.
But he says those companies don't have the 'disruptive mentality' that Xero and a lot of new start-up companies do.
For example, Mr Griffin says Mr Thiel has put three rounds of funding into Xero and he only invests in things that he thinks will make a big difference - like PayPal, Facebook and LinkedIn.
Mr Griffin says he saw that potential in Xero to make a massive difference to how an average business runs its accounts.
He says even the founder of MYOB Craig Winkler put money into Xero after he left MYOB.
