Sorry to be a downer on a Friday, but you're sure to cry after you read this...but not if you're a long-time investor in Amazon (AMZN). The power of revolutionary companies is truly remarkable, and one ought to have a enough foresight to see where these unique companies can go in the future. I'm just not seeing that fully with Bitcoin these days, but at the time Amazon was an example of a company that produced something so unique that even today there aren't many companies (if any) that can rival its business model.
Amazon first went public back in 1997, when its stock was priced pretty modestly at $18 per share. If you had invested $100 in Amazon at the time, 20 years later on October 26, 2017 you would have made $49,781.62 not including dividends. Wow. Just think if you did the same for any of the other major tech companies taking the world by storm!
Anyone with Amazon in their retirement account at the time is likely singing a happy tune today. In fact, the stock has split almost 496 times since its IPO, which is absolutely unheard of in such a short time frame. Amazon's stock split three times in quick succession: once in 1998 and twice in 1999. In June of 1998, Amazon announced a 2:1 split, followed by a 3:1 split in January of 1999 and a 2:1 split eight months later. This means a single share purchased at the IPO in 1997, became 12 shares less than three years later.
It wasn't the stock's prowess in earnings that made the stock gain in value over the years...it was the stock split.
According to Investopedia: A stock split occurs when a company decides to issue additional shares to current shareholders in accordance with the number of shares already owned. A 2:1 split means shareholders receive an additional share for every share they already own. An investor who owns 100 shares, for example, ends up with 200 shares. Stock splits can be as generous as the company that issues them, but 2:1 or 3:1 ratios are most common.
When a stock splits, its price is reduced by the same factor. A 2:1 split means shareholders have twice the number of shares valued at half the price so the total value of the shares remains stable. A 3:1 split means the stock price is reduced to one-third of the original value.
Companies may announce a split for numerous reasons, chief among them being the desire to keep stock attractively priced for investors, and arguably more liquid. Amazon has had a massively successful history of this and is showing no sign of slowing.
The company is looking for a second headquarter center, and wherever it is placed will alter the economy of that city forever. One can only wonder how much higher these companies can go.
Greetings, GradMoney Readers!
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