Despite a recent slump in its share price, Apple retains its strong fundamentals, which suggests that it will continue providing outstanding results to investors who have chosen to put their trust in its current management. This is not without precedent, seeing as how Apple has produced enormous increases in its share prices since its initial public offering (IPO) in 1980 in spite of the occasional setbacks, so much so that those who were either wise enough or fortunate enough to hold onto their Apple shares have managed to become rich in the process. Something that bodes well for its current investors.
Here is what you would have if you had invested $1,000 in Apple's IPO.
IPO in 1980
If you had $1,000 on December 12, 1980, you would have been able to get in on the action when Apple went public. (1) Given that its IPO was priced at $22 a share, you would have been able to purchase 45 shares in the tech giant with a $10 remainder. Since you cannot have partial ownership of shares save through means that are too complicated, too time-consuming, and too irrelevant to be mentioned here, we will assume that you bought 45 shares in Apple before spending the $10 remainder on something that provided a lot more immediate gratification at the time.
Stock Split in 1987
Apple has had a total of four stock splits over the years. (2) Like its name suggests, a stock split is when a single share becomes multiple shares, with each one being worth a proportional percentage of the original share's value. For example, if someone had a $100 share that was subjected to a 2 for 1 stock split, said individual would have 4 shares at $25 per share. Likewise, if someone had a $100 share that was subjected to a 10 for 1 stock split, said individual would have 10 shares at $10 per share. Stock splits tend to be carried out for the simple reason that corporations want their shares to be bought and sold by interested individuals on a regular basis, meaning that it wants to make its shares more affordable to more people to a certain extent. By doing this, they can even increase their market capitalization because more accessible shares mean more people buying them, which in turn, causes the share price to rise through the increased competition between interested individuals for a limited number of shares.
Regardless, Apple's first stock split was a simple 2 for 1 stock split that happened on June 16 of 1987. As a result, if you had bought 45 shares in Apple at its IPO, you would have had 90 shares by the time that the stock split was done. It should be noted that while each share had been worth $78.50 before the stock split, each share was worth $39.30 at the end of the trading day after the stock split, meaning that you would have had $3,532.50 before the stock split and $3,537 after the stock split, which were enormous increases compared to the $990 spent in 1980.
Stock Split in 2000
The second stock split came on June 21, 2000. Once again, it was a 2 for 1 stock split, meaning that you had 90 shares going into the stock split but came out with 180 shares. Before the stock split, each share had a share price of $101.25, but after the stock split, each share closed at a share price of $55.62. Based on this, it is clear that the stock split had a noticeably positive effect on Apple's share price, though it is still not as impressive as how Apple's share price has risen in the time between the stock splits in 1987 and 2000. After the 2000 stock split, you would have had $10,011.60, which meant an incredible rate of return on your initial investment.
Stock Split in 2005
By February 25, 2005, Apple's share price had risen to $88.99, which convinced its management that it was time for another 2 for 1 stock split. As a result, you would have had 180 shares at $88.99 per share but came out with 360 shares at $44.86. Something that made for an astonishing increase over the initial investment of $990, seeing as how there is a difference of $15,159.60 between $16,149.60 and $990, which represents something around a 1,531 percent return.
Stock Split in 2014
After the stock split in 2005, Apple's share price started to soar because of a succession of remarkable products which brought it to the height of its fame and fortune. This can be seen in how $44.86 per share became $645.57 per share before the stock split on June 9, which was a 7 for 1 stock split because Apple's share price had seen such enormous increases that it could not be brought back under control without something much more dramatic than the norm. By the time that it was over, you would have had 2,520 shares at $93.70 per share, which means a remarkable $236,124 or a 23,751 percent return.
Apple closed at $100.23 on March 27, 2016. (3) If you had 2,520 shares, that would mean $252,579.60 in wealth, which in turn, means a 25,413 percent return over the course of 35 years. Simply put, that is a remarkable number, which makes it no wonder that so many people have put their trust in Apple over the years.
With that said, it is important to note that the frequent increases in Apple's share price have not been the sole way that you would have benefited from participating in its IPO. After all, Apple pays dividends on its outstanding shares, meaning that you would have received sums of cash on a fairly frequent basis. Although dividends tend to be relatively low in number, they can add up with surprising speed, particularly after the stock splits had increased your initial 45 shares to 360 shares in 2005 and then 2,520 shares in 2014. Furthermore, it is worth noting that your dividends could have been put to productive use as well, meaning that you would have reaped even more benefits from those investments.
Summed up, it is clear that Apple lives up to its reputation. Now that it has experienced a slump but still retains its strong fundamentals, it remains an extremely attractive investment option, which is something that interested individuals should consider before stock market movements cause Apple's share price to start picking up its pace once again.
Written by Garrett Parker
Read more posts by Garrett Parker