As large and omnipresent as Amazon is today, like many of its tech counterparts the company had humble beginnings, while its unconventional business model had initially left investors worried that this was just another dot-com fever dream destined to be wiped out by the competition. With Jeff Bezos at the helm and his motto ‘get big fast’ influencing every move, what started as an online book retailer soon morphed into an e-commerce giant, sporting every imaginable type of product, media and service.
In less than two decades, Amazon became known as the largest online marketplace, AI assistant provider, live-streaming platform and cloud computing platform, with hundreds of millions of subscriptions globally, physical stores, its own smart devices and a delivery system that can get things to customers in just an hour. Twenty-five years since its inception, it is one of the most valuable public companies in the world, joining the ranks of the ‘Big Tech’ alongside Google, Apple and Facebook.
A brief history of Amazon
Founded in the garage of Bezos’ rented home in Washington, the founder received a helping hand from his own parents who initially invested almost $250,000 in the startup. It originally opened for business as an online bookseller with sales initially taking place thanks to word of mouth and with Bezos himself assisting with assembling the orders and driving the packages to the post office. Within a month, the retailer had shipped to all 50 US states and 45 countries, while by the end of 1996, it had amassed a staggering $15.7 million in revenues.
In 1998, Amazon moved beyond books by selling music and DVDs, as well as additional products like toys, electronics, tools and kitchen utensils. Soon enough, Bezos’ empire branched out to introduce a service known as Amazon Marketplace which allowed individual merchants to sell their products alongside its own items, while aiming to offer quicker shipping for selected items, it introduced Amazon Prime. The second largest paid membership programme in the world, it counts more than 100 million paying customers as its members.
Next, came the launch of its first consumer product, the Kindle e-reader which was followed by the Echo speaker, equipped with the brand’s own artificial intelligence system dubbed ‘Alexa’ and the Kindle Fire, a tablet computer.
The company has also invested in several ventures and growing firms both in the US and abroad. Amongst these include launching a cloud computing and video on demand services, a studio that develops movies and TV series, as well as purchasing well-known brands like Zappos, Audible and Whole Foods amongst others.
The company was originally called ‘Cadabra’ that stemmed from abracadabra, the word said by conjurors when performing a magic trick. However, the reference to magic was somewhat obscure, while at times, the name was pronounced as cadaver. While looking through the ‘A’ section of a dictionary, Bezos came across the word ‘Amazon’ which seemed fitting because it was Earth’s largest river and he planned to make his store the largest bookstore in the world.
Amazon goes public
Amazon went public in May 1997 at a price of $18 per share with its common stock listed on the Nasdaq Global Select Market. The IPO helped the e-commerce giant raise a staggering $54 million. The cash it received together with its successful stock helped it to fund its aggressive growth and acquisition strategy.
By 1998, Amazon’s revenue had reached $600 million, marking its meteoric rise and popularity, catapulting Bezos into the public eye. Fast forward to twenty years later, Amazon’s market value reached $1 trillion and Bezos became by far the richest person in the world.
Amazon’s shares split
The company’s shares have split tree times since it went public. In 1998 and 1999, the stock split on a 2-for-1 basis, whereas in 1999, there was a 3-for-1 split. This means that for every one share, you would have received two shares and three shares for every one respectively.
By splitting its stock, Amazon increased the total number of shares in the company by dividing its existing ones. Although the number of shares increased, their price decreased, yet the company’s market capitalisation remained the same.
So, if you had invested $100 in its IPO back in 1997, you would have received five shares at $18 per share. This simple investment would have been worth around $129,186 at the end of the trading day on February 2020, when shares closed at $2,153.10 each, marking a jaw-dropping increase of more than 129,000% on the initial $100 investment.
In recent years there has been speculation as to whether Amazon will issue another stock split, but according to Bezos this doesn’t seem likely to take place any time soon, despite not ruling it out entirely. In the meantime, after the stock bounced back from the Covid-19 market sell-off in March and hitting new record high, Amazon marked an impressive growth curve and is now worth $1.5 trillion as homebound shoppers continue to embrace the company that has been supplying them with daily necessities ranging from food and hand sanitizer to baking pans, books and wading pools.
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