Microsoft Went Public 40 Years Ago Today – How Rich Would You be Today If You Invested $10k At IPO And Never Sold A Share??

Let's play a fun hypothetical game. Let's pretend that it is March 1986, you are a 25-year-old who has just inherited $10,000 from a rich uncle. You were wondering how to put that $10,000 to use. You thought about buying a cool car or maybe a boat. Before you do anything really dumb, you call up a friend from college who is working as a stockbroker.

That friend gives you the following advice:

"On Thursday, this little software company in Seattle is going public. I don't understand what they do, but everyone in the office thinks this is the company of the future. It's called Microsoft. Put all $10,000 into Microsoft shares the moment it is publicly available."

You follow his advice, and on March 13, 1986, that relatively small, Seattle-based software company called Microsoft makes its debut on the public markets. In real life, the hype for Microsoft on IPO day was so intense on the trading floor that the opening price was bumped from $16 to $21 at the very last minute. By the end of the trading day, the stock was sitting at $27.75.

That day minted three of the largest personal fortunes in human history for founders Bill Gates and Paul Allen, and early executive Steve Ballmer.

But what about our hypothetical dream scenario? What kind of fortune would you be sitting on today had you followed your broker's advice, bought $10,000 worth of shares at IPO, rode the dot-com crash, the 2008 financial crisis, and decades of tech evolution without ever selling a single share???

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$10,000 Invested At IPO

Buying in at the initial offering price of $21 per share, your $10,000 would have netted you exactly 476 shares of Microsoft stock. However, today you would not be sitting on just 476 shares. Over the years, Microsoft has conducted NINE stock splits:

• Initial Purchase (March 13, 1986): Your $10,000 at the $21 IPO price buys you exactly 476 shares.
• Split 1 (September 21, 1987): A 2-for-1 split doubles your stockpile to 952 shares.
• Split 2 (April 16, 1990): Another 2-for-1 split brings you to 1,904 shares.
• Split 3 (June 27, 1991): A 3-for-2 split bumps your count to 2,856 shares.
• Split 4 (June 15, 1992): Another 3-for-2 split increases your holding to 4,284 shares.
• Split 5 (May 23, 1994): A 2-for-1 split doubles your stack to 8,568 shares.
• Split 6 (December 9, 1996): Another 2-for-1 split rockets your count to 17,136 shares.
• Split 7 (February 23, 1998): A 2-for-1 split brings you to 34,272 shares.
• Split 8 (March 29, 1999): Another 2-for-1 split doubles your holding to 68,544 shares.
• Split 9 (February 18, 2003): The final 2-for-1 split doubles your count one last time, landing you at a staggering 137,088 total shares.

Thanks to the magic of those nine splits, your original block of 476 shares would have ballooned into a staggering stockpile of 137,088 shares.

As I type this article, Microsoft is trading at around $404 per share. So your 137,088 shares, which you bought 40 years ago today for $10,000, would be worth $55,383,552.

But that's not actually the full story.

Microsoft famously did not issue a dividend for its first 17 years as a public company. The company issued its first-ever dividend in 2003. Let's pretend your hypothetical college buddy stockbroker called you up in 2003 and said:

"Hey, you know those Microsoft shares which you still own and are worth around $2 million today? First off, you're welcome. Secondly, I just enrolled your account in a dividend reinvestment plan (DRIP). Going forward, whenever Microsoft issues a dividend, instead of receiving cash, you'll use that money to automatically buy more shares. Cool? Ok, see you at the reunion! You owe me a beer!"

Fast forward to the present. If you held onto all of your shares and remained enrolled in the DRIP plan, today you would have roughly 220,000 shares of Microsoft. And at today's price per share of $404, your $10,000 investment in 1986 would now be worth…

$88,880,000 

And actually, it gets better.

Because you now own ~220,000 shares, your quarterly dividend payouts on Microsoft's current $3.64 annual rate would generate roughly $800,800 in completely passive cash every single year.

That's $88 million in net worth and $800,000 in annual passive income, all from a single $10,000 investment 40 years ago.