When Did Amazon Go Public? A Look at the Company‘s Historic IPO
Amazon has become one of the world‘s most dominant and successful companies since its founding in 1994. The ecommerce giant has transformed industries, changed consumer behavior, and produced jaw-dropping innovations. But many may not know the story behind Amazon‘s beginnings as a public company. When did Amazon go public with its initial public offering (IPO), and what has transpired since?
The Early Days of Amazon
Long before Amazon became the behemoth it is today, it started off in 1994 as an online bookstore founded by Jeff Bezos in his Seattle garage. Bezos chose books as the initial category to sell because of the large number of titles available in print, making an online catalog easy to build.
In the first month of launching, Amazon had already sold books to people in all 50 states and 45 countries. Growth was swift in these early days. By June 1995, Amazon saw $20,000 in weekly sales. And by September, it was making $20,000 per day.
This early growth showed the promise of ecommerce and Jeff Bezos‘ vision. Amazon raised $54 million through multiple rounds of funding during its first three years while still a private company. With access to capital and surging growth, Amazon was ready to take the pivotal next step.
Amazon‘s Initial Public Offering
On May 15, 1997, Amazon went public, offering shares of common stock for the first time. This process is referred to as an initial public offering or IPO.
3 million shares were offered to the public at $18 per share. The IPO gave Amazon a market valuation of $438 million. While substantial at the time, it seems minuscule compared to Amazon‘s current market cap which stands at over $1 trillion.
Amazon‘s stock jumped dramatically on its first day of trading. Shares opened at $23.50, a 30.6% increase over the $18 offer price. The stock closed even higher at $23.75, reflecting investor excitement about the future of ecommerce and Amazon itself.
Why Amazon Went Public
Amazon opted to go public for a few key reasons:
Raise capital for growth: As a newly public company, selling stock on the market allowed Amazon to raise significant upfront capital quickly. This provided financing to fuel expansion plans.
Early investors can cash out: Early investors and employees were able to sell a portion of their shares to achieve returns. For example, founder Jeff Bezos sold nearly 1 million of his shares in the IPO.
Increased visibility & credibility: Being publicly traded gave Amazon more visibility and credibility as a young tech company. This helped attract talent and business partners.
Mergers & acquisitions currency: Stock shares gave Amazon a valuable asset to use for acquiring other companies. Stock shares would fuel Amazon‘s future M&A strategy over the years.
So in May 1997, Amazon took a pivotal leap to becoming a publicly traded firm. The IPO provided an influx of growth capital while rewarding early investors and employees. It also gave Amazon a whole new level of visibility in the business world.
Amazon‘s Market Cap Over the Years
Since first going public in 1997 at a $438 million valuation, Amazon‘s market capitalization has grown exponentially over its 25+ year history:
- 1997 IPO – $438 million
- 1999 (peak of dot-com bubble) – $33 billion
- Early 2000s (post-bubble) – $5-10 billion
- 2015 (20 years post-IPO) – $250 billion
- 2021 (pandemic peak) – $1.7 trillion
- Current 2023 – $1.15 trillion
As this shows, Amazon‘s market valuation has seen extreme growth and fluctuations over the decades. Periods of big peaks were followed by steep crashes when tech bubbles burst. But Amazon ultimately recovered and found new highs through relentless innovation.
For perspective, $1,000 invested in Amazon‘s 1997 IPO would be worth over $1 million today – a 100,000% return. Amazon has handsomely rewarded early investors who believed in the company and held on throughout its journey.
Amazon Prime – A Key Inflection Point
A major inflection point came in 2005 when Amazon launched its Prime membership program. Prime gave shoppers free 2-day shipping for an upfront annual fee. This was retail game-changer. It led more households to shift their shopping habits online and choose Amazon for the convenience.
This strategic move was crucial to securing customer loyalty. Prime flipped the competitive landscape clearly in Amazon‘s favor versus rivals. As of 2023, Amazon Prime has grown to over 200 million members globally. And Amazon has leveraged that loyalty to expand Prime into a whole ecosystem of benefits – streaming video & music, grocery delivery, pharmacy, and much more.
How Amazon’s Business Model Evolved
Since the mid-1990s, Amazon’s fundamentals have stayed the same in focusing fiercely on the customer experience. However, its business model has greatly evolved over the decades:
Mid 1990s – Online bookstore
Early 2000s – Expands to sell more products like electronics, toys, apparel, furniture, etc.
2006 – Launches Amazon Web Services (AWS) for cloud computing
2007 – Unveils first Kindle e-reader
2013 – Debuts Amazon-branded consumer hardware like Echo smart speakers
2017 – Acquires Whole Foods Market to enter physical grocery
2021 and beyond – Opens Amazon Fresh concept stores integrating physical retail with digital technologies
So while Amazon started just selling books online, it gradually leveraged technology to expand into countless other product categories, services like Prime, content streaming, cloud enterprise solutions, AI-powered devices and much more.
This ever-evolving business model is what has allowed Amazon to relentlessly disrupt itself and grow for over 25 years since first going public. Amazon enters entirely new industries before others recognize the opportunities.
The 1-for-20 Stock Split of 1998
On January 5, 1998 Amazon announced a stock split. This increased the number of shares outstanding by issuing more shares to current shareholders.
Specifically, Amazon’s upcoming 1-for-20 stock split meant that if you owned 1 share of Amazon, you would now own 20 shares. And the stock price would adjust accordingly.
- Pre-split price: $300 per share
- Post-split price: $15 per share (300 / 20)
After this split was enacted, the number of Amazon shares outstanding jumped from 24 million shares to 480 million shares.
Stock splits do not change the underlying fundamentals. Market cap stays the same; ownership percentages remain unchanged. A split makes shares more affordable for retail investors and often precedes future share appreciation.
The Dot-Com Bubble Burst
Amazon went public just a few years before the peak of the dotcom bubble in the late 1990s/early 2000s. Investor enthusiasm propelled internet stocks like Amazon to staggering valuations that eventually proved unsustainable.
In December 1999, Amazon hit a split-adjusted peak of $106 per share right before the bubble burst. In reality, Amazon‘s actual value at its peak was likely far below this inflated stock price driven by speculation.
When the dot-com crash hit in 2000-2001, Amazon stock plummeted from highs around $100 per share down to a low of just $5.51 in September 2001. Amazon suffered huge losses during the dotcom fallout, but managed to avoid bankruptcy and turn itself around after mass layoffs and cost cuts.
Surviving the Burst to Achieve Record Highs
Amazon learned tough lessons about managing resources efficiently from the dot-com bubble burst. Once consumer enthusiasm returned for internet stocks in the mid-2000s, Amazon was poised for its next wave of strategic growth initiatives like Prime.
In October 2009, Amazon stock finally re-attained the $100 per share mark it had traded at briefly 10 years prior during the peak bubble years. This reflected Amazon‘s resurgence through executing its long-term vision.
Amazon has since gone on an epic run over the past decade. In 2022, Amazon achieved its highest stock price ever at $3,773 per share. This seems astronomical compared to its 1997 IPO price of just $18 per share.
Adjusting for stock splits over time, $1,000 invested in that 1997 IPO would have grown to over $1 million at Amazon‘s peak – exemplifying the staggering returns it has achieved for early investors.
Where is Amazon Stock Headed Next?
- Current price as of February 2023: $97 per share
- 12-month consensus target: $142 per share
After reaching as high as $3,700 per share in mid-2022, Amazon‘s stock has fallen sharply amidst current economic uncertainty just like other tech giants. But Wall Street still foresees sizable upside ahead.
The 12-month average price target from analysts reflects 45% upside potential from current 2023 levels. This points to their confidence in Amazon recovering once macroeconomic headwinds settle.
Some of the core reasons analysts remain bullish on Amazon long-term:
- Resilient ecommerce revenues and expansion of physical retail
- Growth potential still ahead for Amazon Web Services
- Steady Prime subscription retention and potential fee increases
- Advertising emerging as a prominent moneymaker
- Healthcare push with Amazon Care, medical supply sales, and pending 1Life acquisition
Since first launching its IPO in 1997, Amazon has boldly disrupted itself to drive innovation and evolve for long-term success. The company has continually entered new market fronts from cloud computing to streaming entertainment to AI-powered devices.
While recent stock volatility reflects current challenges with inflation, Amazon has shown its ability to persevere through past major swings over 25+ years as a public company. Given its track record of self-driven transformation, Amazon appears poised to still achieve new heights in the decades ahead.
