Microsoft (NASDAQ:MSFT) is most typically known for their Windows and Office software. The software that it develops is used so widely, that Microsoft is one of the few companies that have reached a market cap of 1 trillion USD (more than 3.8 trillion ZAR).
However, despite its widespread success, Microsoft was not a brand that was ubiquitous more than 35 years ago. When Microsoft first started selling its shares in March 1986, the market cap was less than 1 billion ZAR, which would have made it a small-cap stock by today’s standards. Microsoft stock is known to have created tremendous wealth for investors over the past 35 years, and we can therefore have a look at how much an investment of R10,000 made in 1986 would be worth today if you had bought the stock at the Initial Public Offering (IPO) price.
Microsoft held its IPO on March 13, 1986, and the initial trading price was R291 per share. With an initial investment of R10,000, you could have purchased 34 shares. It is important to note, however, that the stock split nine times over the years and two of those were 3-for-2 splits. When considering these splits, your 34 initial shares would have multiplied to a whopping 83,808 stocks, and these shares would be worth 300 million ZAR at the current stock price of R3,577.43, at the time of writing. This would have provided investors with an annual return of around 25% per year and a cumulative return of almost 211,000%.
What is Microsoft’s Secret?
Microsoft has an extraordinary growth story, and its success was cemented even before the IPO was held. Microsoft’s success goes back to the early days after Bill Gates had founded the company in 1975, and during these years, the future success of Microsoft was guaranteed as result of strategic relationships with Intel and IBM. Microsoft is still growing at a steady pace, with its management directing it into a new area ruled by subscription-based products as well as cloud services, let alone the growing phenomenon surrounding cryptocurrencies.
Microsoft has surged to new heights in the last few years, reporting revenues of more than 563 billion ZAR at the end of Quarter 3 FY21, showing an increase of 31% from the previous quarter, indicating that digital adoption curves have not slowed down despite the pandemic, but increased rapidly.