If you had invested $ 10,000 in it Netflix‘s (NASDAQ: NFLX) first public offering, you would now sit comfortably. There have not been too many investment opportunities like Netflix, and investors who have bought and held their shares for the past 18 years have made a boatload of cash. With the investment of $ 10,000, owners would now have about half a billion dollars. Let’s see how that works.
Keep going through uncertain times
Way back when streaming was still in the future, already 23 years ago, Reed Hastings and Marc Randolph created Netflix as a mail order video rental company. Customers pay $ 19.95 per month for unlimited door rental of movie rentals. This was in the days when there was a Blockbuster Video Store on every block, and video delivery was an innovation. The company gradually took steps to move to new spaces, such as DVD rentals, and by 2002, with 600,000 U.S. members, it went public at $ 15 per share. The company offered 5.5 million shares at its IPO, net advancing funds of $ 82.5 million.
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The company had two historic shares, a two-for-one in 2004 and a seven-for-one share split in 2015, meaning that one share at the time of inception an investor received 14 shares after 2015.
Netflix was already a profitable investment after the first decade, with about 800% return, but if investors sold at that point, for the sake of volatility, they were missing out on one of the biggest investment opportunities ever. In those years and the following years, the company continued to grow, establishing partnerships with companies such as Call to enhance its interventions and capabilities with features such as personalized recommendations. Two major changes occurred during that period: Streaming was introduced in 2007, and Netflix began producing its own movies and series. In the meantime, the subscriber base continued to grow, reaching one million subscriptions in 2003 and 10 million in 2009.
The share price began to make big upward movement in 2013, and investors who still persisted saw their shares climb nearly 24,000% in total after a rise that ended in 2018, at which point it entered a period of high volatility. Between 2018 and 2020, the streaming market became competitive, and Netflix shares lost about half of their value twice. Investors may be asked to sell at one of these falls, but the price came back at the end of 2019.
Since COVID-19 came shortly after the start of 2020, streaming has become even more important as customers turn to home entertainment, and Netflix has added more than 10 million paid subscribers for a total of nearly 200 million. Shares continue to die, increasing in value almost twice as much, giving initial investors a whopping 41,000% return on investment (as of Friday). For anyone who has invested $ 10,000 in IPOs, that is almost half the billionaire status from a single investment.
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The moral of the story
The COVID-19 lockdown is hugely beneficial to Netflix owners, with shares nearly doubling since late 2019, leading to incredible wealth for anyone who has invested and maintained $ 10,000 in the IPO.
Is it too late to come up with these great profits? Probably a factor as to why they’re doing so poorly. However, the more important lesson to learn from the story is not about Netflix, but about recognizing a company with potential and sticking to that trust despite ups and downs. The next Netflix may be hesitant right now, and investors may take the opportunity to invest their next $ 10,000 in emerging companies and enjoy years of long-term growth.
