May 23, 2002 was the day Netflix Inc. went public. If you had the opportunity to invest in that offer back then, you could have made a fortune, as today shares have grown in value 130-fold.
If you had invested $1,000 at the IPO price of $15 a share, your shares would now be worth more than $140,000. That’s a return of more than 14,000% today.
Let’s take a look at how the company got to where it is today. Back in the 1990’s, Reid Hastings, founder, and CEO of Netflix, learned the hard way that DVD rentals came with hefty late fees. Hastings was charged a $40 late fee for a borrowed copy of Apollo 13 that was discovered in the back of his closet. This planted the idea of finding a solution to this problem, and in 1997 Netflix was born. Within five years, the no-late-fee DVD/CD rental company had 600,000 subscribers paying $19.95 a month for its services. According to the IPO prospectus, Netflix was generating more than $75 million in revenue and raised close to $82.5 million in its IPO.
Since then, the company changed paths and focused solely on streaming since 2007. The company was able to hit the 100 million subscribers milestone earlier in April 2017, and is now worth nearly $68 billion. According to its recent shareholder letter, Netflix spends an estimated $1 billion on marketing its products and content. It also has an estimated $6 billion budget committed to producing original content, creating cult favorites such as ‘House of Cards’, ‘Orange is the New Black’ and ‘Narcos’, to name a few.
Netflix is an IPO success story that has created a giant in the streaming industry.
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