This year marks 20 years since Alphabet (GOOGL 1.25%) (GOOG 1.31%), known then as Google, Inc., launched its IPO. The company faced significant regulatory scrutiny at that time, and a desire to launch its IPO at a higher price gave way to pressure, pushing the IPO price down to a split-adjusted $2.13 per share.
Despite such challenges, the company evolved into a digital advertising juggernaut, and the profits generated from that business led to Alphabet acquiring numerous other companies. With that expansion, even an investor with one pre-split share earned massive gains over the last 20 years.
The share growth of Alphabet
Investors who bought one share in 2004 would now hold 40 shares -- 20 shares with voting power under the "GOOGL" symbol and 20 that do not have voting rights and trade under the "GOOG" symbol.
This is because the company initiated an unusual 2-for-1 stock split in 2014 when it created a third class of non-voting shares (only insiders own the second class of shares, known as "B" shares). Also, each class of Alphabet stock split 20-for-1 in 2022, leading to the current weighting of shares.
Consequently, this holding in Alphabet would have yielded a total return of just under $6,700 today, including the dividend that began in the second quarter of 2024.
A key lesson of Alphabet's IPO
Admittedly, that gain might disappoint compared to the lifetime gains of Amazon, whose one share at the 1997 IPO is now worth about $34,000.
However, Amazon's market cap was only about $450 million at the time, meaning it had already doubled approximately six times when it reached Alphabet's IPO market cap of about $27 billion.
This distinction is important since, today, companies tend to launch IPOs when they have already reached large-cap status. Nonetheless, the Alphabet example shows that it is not too late to earn considerable gains from such a market cap. If one can apply these lessons to a future tech industry leader, massive returns are still possible.
