It is hard to imagine the world of personal computers without Microsoft. The company’s operating system – Windows – is a household name all over the world, and it is one of the company’s biggest revenue earner.
Bill Gates and Paul Allen founded Microsoft in 1975 in Albuquerque, New Mexico, and it has grown to be one of the largest companies in the world by market capitalisation. Microsoft is among the top five biggest companies collectively referred to as The Five horsemen or The Big Five with the likes of Amazon, Apple, Alphabet (Google’s parent company), and social media giant Facebook.
Microsoft designs, manufactures, markets, and sells computer software and hardware like the earlier-mentioned Windows, cloud service Microsoft Azure, video games and video game console Xbox, PCs, tablets, accessories, server applications, video conference software Skype, and the popular Microsoft Office suite which I am currently using to write this article among others. Microsoft is an all-round software and hardware company.
The tech giant became a publicly-traded company on March 13, 1986, at an opening price of $21 per share and it managed to sell over 3 million shares that day. Over the 45-year existence of the company, it has had nine splits in its stock, the first one happening on September 21, 1987, and the last one on February 18, 2003.
Here is Microsoft’s stock split history.
September 21, 1987
This was Microsoft’s first stock split, and it was 2 for 1 split. This means that if a shareholder had one share pre-split, they owned two shares after the split. For example, a 100 share position pre-split, became a 200 share position after the split.
April 16, 1990
This was Microsoft’s second split and it was also a 2 for 1 split. The above example also applies here.
June 27, 1991
A little bit over a year after its second stock split, Microsoft had its third split, and this time it was a 3 for 2 split. This means that if a shareholder owned two shares of Microsoft pre-split, they owned three shares after the split. For example, a 300 share position pre-split, became a 450 share position after the split.
June 15, 1992
On this day, Microsoft had its fourth split, a 3 for 2 as well. The above example applies here as well.
May 23, 1994
In 1994, Microsoft went back to its 2 for 1 stock split where shareholders with one share would be having two so if a shareholder owned 500 shares of Microsoft before the split, they had 1000 shares after the split.
December 09, 1996
This day saw the tech giant have its sixth stock split after trading publicly for 10 years. This split was a 2 for 1, and the previous 2 for 1 split examples apply here.
February 23, 1998
Microsoft split its stock further for the seventh time on this day, and it was a 2 for 1 split meaning that if a shareholder owned 2,000 shares of the company before the split, they owned 4,000 shares after the split.
March 29, 1999
On this day, Microsoft made its eighth and second last stock split, a 2 for 1. This means that shareholders that owned 4,000 shares before the split now owned 8,000 shares after the split.
The company’s sixth, seventh, and eighth splits happened during the dot com bubble, a period when there was a massive growth in the use and adoption of the internet from 1996 to 2001. During this period, tech companies had their stock value rise rapidly.
February 18, 2003
On this date, Microsoft split their stock for the 9th and last time as of now, at 2 for 1. This means that shareholders who owned 8,000 shares of the company before the split now owned 16000 shares after the split.
Why do companies split stocks?
To make its stock price affordable
When a company’s stock price rises too high, the company may decide to split its stock to make its price affordable to more investors. For example, if a company’s stock price is $200 per share and it splits it by 2 for 1, the price of such share becomes $100 each.
To increase the stock price
Having an affordable share price makes its demand go high as more investors buy it, which in turn increases its price. Although a share split does not make the company more valuable, the rise in its share price increases its market capitalisation in a way that it has more shares outstanding that have generally increased in price.
Microsoft stock value
From its founding in a garage in Albuquerque, New Mexico 45 years ago, Microsoft has since moved to what is now known as the Microsoft Campus in Redmond, Washington, acquired numerous businesses, expanded its operations, and has a market capitalisation of $1.6 trillion as of October 2020.
By the time of this writing, the company’s stock price is $214.89 per share, and analysts say that with a Compound Annual Growth Rate (CAGR) of 26.4%, if you bought Microsoft stock worth $10,000 at its Initial Public Offering (IPO) on March 13, 1986, and held it until now, that stock would be worth $32.3 million.