Apple IPO hits the big 40

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Anyone investing in Apple at IPO and holding until today would have made a 125,000% return on their investment.  

In the same year that Rubik’s cube hit the shelves, that Pac Man was released, and that CNN launched as the first 24-hour news channel, a nascent company called Apple launched the Initial Public Offering (IPO) of its stock.

On December 12, 1980 at IPO, you could pick up Apple (NASDAQ:AAPL) for $22.00 per share. 4.6 million shares were sold on its inaugural day of trading on the NASDAQ and the stock closed the day at $29 creating approximately 300 instant millionaires (Steve Jobs made a cool $217 million). However, even more modest investors would have made a packet if they’d had the patience and belief to hold long term… very long term.

Any investor buying a single share at IPO would hold 224 shares today due to the five stock splits there have been[1]. This means a $22 investment would be worth $27,552 at the current price of $123 per share, which represents a 125,000% return on investment…. And don’t forget the tasty dividends.

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Apple elicits a lot of emotion. To many of its legions of followers (or is that worshippers?)  it’s more than just a company; holding shares is not just financially motivated, it’s about the dividend of pleasure too. It remains the most followed US stock on ADVFN.

The ups and downs

Less than a year after IPO, Apple was amongst the world’s three biggest microcomputer companies and the company’s 1981 H1 revenue alone exceeded the $118 million of 1980. However, by 1982 The New York Times – for one – was cautioning investors against investing in uber-hyped tech stocks like Apple. Yet in 1983 Apple stock was trading at around $64.

In 1984, the first Macintosh computer launched to much fanfare. After initial commercial success, sales went into decline in the second half of the year and it was apparent that it was no match for rival IBM’s PC. Then in 1985 co-founder Steve Jobs was ousted from the company. Apple’s instability at the helm translated into a falling share price. The stock went south of $15.

Under then CEO John Sculley (CEO 1983-1994), Apple brought out the System 7 operating system (Mac OS 7) and launched the PowerBook laptop. The PowerBook line was a hit and made Apple in excess of $1 billion in revenue within the first year. However, a number of misses followed and Sculley made the ill-fated decision to go with the PowerPC microprocessor architecture (developed through an Apple, IBM and Motorola alliance) instead of plumping for the rapidly advancing Intel processor. This catalogue of errors led to Apple failing to meet its earnings forecast. Sculley exited stage left and there followed a few years of shifting sands at the top. In 1996, the company lost approximately $870 million and its market cap shrank to $3 billion.

Jobs was re-hired and named interim CEO in 1997 just at the point when the company was on the cusp of bankruptcy. Jobs spearheaded the company’s new focus on simplicity and the release of the iMac G3 the following year brought Apple back to the fore.

Jobs became permanent CEO in 2000 and ushered in a new era and made the company a household name with the release of the iPod in 2001. The highly successful product won Apple a solid base of consumer fans and marked the start of product evangelism and the cult of Apple. The iPod certainly didn’t have an immediate impact on the stock price; it moved up a paltry 5 cents to $9.38 on the first day of trading after the launch. However, by the end of 2004, 10 million units had been sold (the current tally is over 400 million) and Apple’s stock was trading at $32.20.

Apple continued to rise and was trading at $92.54 on the 9th of January 2007 – the day the revolutionary, game-changing iPhone was launched. Yet again there was negligible increase in the share price on the day of launch (just 7¢), but within six months of the product’s release shares were trading at $122.01. The same pattern followed with the iPad’s release in 2010 and other releases – no massive immediate uplift, but a substantial positive effect over a longer period.

The stock market is forward-looking and the impending release of a potentially revenue-driving, shiny new coveted consumer tech item has frequently correlated with a rise in Apple’s share price. Apple had a run of such lick-able hits and cemented its position as a stock market darling, and like all stock market darlings it was – and still is – prone to entering bubble territory.

2012’s iPhone 5 was not as juicy as analysts predicted. It ‘only’ sold just over five million units on the first weekend it was available, below the forecast six-to-10 million. On its official release date of September 21st, the stock opened at $702.56; within 50 days it had dropped 22% and was trading at $547.06. The share price climbed back to almost reach its September 2012 high before a 7-for-1 split on June 9, 2014.

More recent trading

In August 2018 Apple became the first US publicly traded company to hit a value of $1 trillion and two years later in 2020 became the first public company to have a $2 trillion market cap. It hit an intraday record high of $137.97 on September 2nd, 2020 following the stock split on August 28th, 2020. However, it subsequently plunged 22.5% (losing around $532 billion in market value) in the following two weeks hitting an intraday low of $106.09. At the time of writing, Apple looks to be on a run back towards its all-time high so there could be plenty of festive cheer for investors.

What next for Apple?

You certainly wouldn’t bet against Apple climbing to an even loftier position; the company appears to be valued by a logic all of its own. You also wouldn’t bet against fabled investor Warren Buffet; he still owns around 245 million shares in the company.

 

What could be the next Apple?

Bitcoin is the new Apple and Bitcoin is nearing the same position on the adoption curve as Apple was before its big rally.

 

[1] The stock’s split five times: it’s had three two-for-one splits, one seven-for-one split and most recently (August 28th 2020) a four-to-one split

 

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