American popular media service provider Netflix Inc. which provides more than 100 million subscribers with its latest originals and TV shows. From 1997 the company has come a long way with effectively challenging its biggest competitor Blockbuster Entertainment. On May 23, 2002, it went public with an investment of $990 on the initial public offering of Netflix. On the same day, it would have generated over $310,000 after Netflix stock splits.
Investment in Netflix
If you had invested $990 immediately after Netflix’s IPO, assuming you purchase each share of Netflix at a price of $15, you would have 66 shares. Netflix on the other side traded in a downtrend in early October 2002, where it hit low of $4.85. But sooner things turned around for the company and the early investors too.
Netflix went public in 2002. At the time, it has roughly 1 million subscribers who paid a monthly fee for access to its movies and TV shows. Its main and most popular market was San Francisco, where the company gets the most out of it.
CEO Reed Hastings and his team thought and planned that they had a long runway for growth in fighting with rivals, as DVD technology knock the door into more households. Netflix’s tech-based approach made it scalable, and its software roots gave an extra edge over traditional retailers in 2003.
Early investors were richly rewarded as Netflix battled with — and beat — major competitors like Blockbuster, Walmart and many more for the DVD-by-mail niche. In 2011 the stock reached a $15 billion market cap, in fact, translating into a 30-fold return for people who held for a decade after the IPO.
Two-for-one Stock Splits
The executives pretended and measure the early growth and saw the potential for the most popular entertainment channel, they launched a service in 2007 that maximizes the number of subscribers growth the move changed the direction of the Netflix, it made a strategy to offer exclusive and original content from Netflix a rising entertainment industry.
Twice Netflix only split its stock, once in 2004 (2-for-1) and repeated in 2015 (7-for-1). The two splits didn’t affect the value of the company, but they did ensure that any investors who held through them both would own 14 times their number of Netflix share price.
If you had owned Netflix stock then it’s time to calculate your return, for example, your 132 shares would have become 924 shares, Netflix closed at $98.13 per share on the date of the stock split. The total position was worth $90,672.12 at the close, a 9,058% increase over the initial investment amount.
Courtesy-The Motley Fool
The entertainment giant’s 27,000% return since its IPO makes it one of Wall Street’s best performers. The one another thing is that the shareholders had to endure multiple periods of massive volatility including 50% slumps, on the way to earning that outstanding growth.
Together, it means that stock purchases are possible over periods as short as a dozen years. But investors also have to be willing to pay a price in volatility to have a shot at these massive payouts.