The Journey Of Microsoft: IPO Success And Wealth Creation

On, March 13, 1986, Microsoft went public. Fast forward three and a half decades, and Microsoft, ticker symbol MSFT, boasts a market cap of $1.7 trillion. As of now, company founder Bill Gates stands as the third richest person on the planet with a net worth of $130 billion. For much of the last 20 years, Gates was the richest person in the world, facing little competition. So what was the atmosphere like on Microsoft’s IPO day? Was it a monumental success right from the start? Who walked away wealthy, and how rich could you be today if you had invested in Microsoft shares back then? Let’s dive in!

When Microsoft officially incorporated in 1981, the ownership was divided among its core founders: Steve Ballmer held 8%, Paul Allen possessed 25%, and Bill Gates owned a substantial 45%. The remaining 22% was allocated among some of the luckiest individuals who joined this ambitious startup. The excitement in the air was palpable, especially considering the tech landscape was rapidly evolving, and Microsoft was on the brink of something big.

The day before Microsoft's IPO, Oracle Corporation, led by Larry Ellison, also launched its IPO. Oracle planned to offer 2.1 million shares at $15, but by the end of its first trading day, shares soared to $19.25. This spike was a positive indicator for the bankers overseeing Microsoft's debut, prompting them to raise MSFT's opening price from $16 to $21.

IPO Day: A Historic Moment

On March 13, 1986, at 9:35 AM, MSFT opened at an impressive $25.75 per share. The trading floor buzzed with excitement, and Goldman Sachs' CEO was overheard exclaiming, "It’s wild! I’ve never seen anything like it – every last person here is trading Microsoft and nothing else!" The atmosphere was electric as investors eagerly snapped up shares.

By the end of trading, an astonishing 3.6 million shares had changed hands. The stock price peaked at $29.25, concluding the day at $27.75. However, after the initial frenzy, how much were the key players worth? Was it in the billions? Surprisingly, Microsoft ended the day with a total market cap of $780 million, which was modest compared to today's standards.

Valuations and Wealth Distribution

Bill Gates' 45% stake was valued at $350 million, while Paul Allen's 25% was worth $195 million. Steve Ballmer's 8% translated to $51.5 million. To put this into perspective, Snapchat went public in 2017 with a market cap of around $25 billion, and the CEO received an $850 million bonus, which exceeded Microsoft's entire valuation at its IPO!

Interestingly, while Gates celebrated in Australia by cashing out $150,000 of his IPO earnings to pay off his Seattle house mortgage, Allen remained in Seattle and expressed his happiness, hinting at a champagne celebration later. The contrasting reactions of the founders illustrated their unique personalities and approaches to newfound wealth.

Long-Term Gains: Holding onto Microsoft Shares

So, how much would you be worth today if you had invested in Microsoft shares 30 years ago? Microsoft’s growth trajectory has been remarkable since its IPO. If you had purchased $10,000 worth of Microsoft shares at the IPO, you would have acquired approximately 476 shares. Following several stock splits and dividend reinvestments, your shares would have ballooned to 137,088 shares.

At today’s closing price, your initial investment would be worth an astonishing $32,215,680. This reflects the incredible power of long-term investing in a company with a robust growth trajectory like Microsoft.

Comparative Investment Opportunities

If you are keen on maximizing your wealth through strategic investments, consider Warren Buffett's Berkshire Hathaway. A $10,000 investment in Berkshire back in 1964 would be worth a staggering $105 million today! Additionally, investing $10,000 in Coca-Cola in 1919 would have grown to an astounding $2.5 billion.

Current Status of Bill Gates

As of now, Bill Gates is one of the richest individuals globally, with a net worth of $90 billion. Back in 2000, during the peak of the dot-com bubble, Gates' net worth briefly surpassed $136 billion, making him the 12th richest person of all time when adjusted for inflation. His journey from a young entrepreneur to a billionaire is a testament to the power of innovation and strategic investing.

Key Takeaways