Status: 05/15/2022 03:51 a.m
Amazon went public in 1997 with an issue price of $18. Since then, the company has fundamentally changed the way people shop and made owner Bezos one of the richest men in the world.
In the months leading up to the IPO, company founder Jeff Bezos kept telling potential investors this story:
Three years ago, when I was working for a hedge fund in New York, I stumbled across this number: Internet usage is growing at 2,300 percent a year! That’s when I decided: Against the background of this installment, I’ll develop a business plan.
Supposedly on the car ride with his wife from New York to Seattle, where Bezos founded his company Cadabra in the summer of 1994. A name that reminded a fellow lawyer of Kadaver.
“Cadabra” became “Amazon”
Three months later, he changed the name of his company to Amazon. The business idea remained the same: mail order via the Internet. He made a conscious decision to read books, says Bezos. There are by far the most different types of books on the market. Music is number two. There are 200,000 CDs available, but more than three million book titles worldwide. And 1.5 million of them in English alone.
Amazon.com, for example, went public on the New York technology stock exchange Nasdaq 25 years ago as the “biggest bookstore in the world” – and did well: the issue price was $18 – after three stock splits, that would correspond to $1.50 per share today. Those who got nothing at the allocation could still make a bargain at the end of the first trading day at a closing price of 23 dollars – just under two dollars adjusted for the split. For comparison: On Friday, Amazon shares closed at $2,263. And this despite the fact that the price has fallen by 40 percent since the summer.
Understood the market better than others
“I think I would have at least considered buying Amazon back then. Although I have to admit that I didn’t predict that the price would rise by 2,500 percent,” says Arun Sundararajan, a tech expert at New York University has been dealing with the Amazon phenomenon for years. But Amazon was already a company that understood online trading better than others – even at the time of the IPO, according to Sundararaja.
In his view, unlike its competitors, Amazon had understood one thing: “If you don’t deliver the Christmas presents on time, then you’ve lost all trust.” At Christmas 1998 and 1999, Amazon was the only online retailer whose site hadn’t collapsed, Sundararaja continues to report. Amazon had the capacity to cover the enormous demand and built the logistics infrastructure to deliver the Christmas presents on time – which was good for customers, but initially not for shareholders.
Instead of distributing profits, Besoz invested heavily. The online bookstore has become an online marketplace for just about anything you can imagine. With Kindle, Amazon set the e-book standard that covers 80 percent of the US market. The highly profitable Amazon Web Service offers cloud services worldwide.
A strategy that changed the world
Over time, the question has repeatedly arisen as to whether Amazon is doing it right – continuing to grow instead of skimming off profits, Sundararaja says. But with this strategy, Amazon has changed the entire shopping behavior more than any other company in the western world – and is responsible for the fact that it is so normal to shop online today.
That and the fact that broad-based online retailers are less dependent on trends and developments than Facebook or Twitter, for example, makes Sundararajan sure that Amazon will continue to be successful 50 years after the IPO. When I look at the top five tech companies – Microsoft, Amazon, Apple, Google, and Facebook – he thinks Amazon is the most likely to be around 25 years from now and dominating the market.
Issue price $18 – Amazon went public on the New York Stock Exchange 25 years ago
Peter Mücke, ARD New York, May 14, 2022 3:20 p.m