Tech Stocks

Epic Tech IPOs: Triumphs, a Travesty, and a Tragedy


Microsoft owner and founder Bill Gates poses outdoors with Microsoft's first laptop in 1986 at the new 40-acre corporate campus in Redmond, Washington

Photograph by Joe McNally/Getty Images

Microsoft owner and founder Bill Gates poses outdoors with Microsoft's first laptop in 1986 at the new 40-acre corporate campus in Redmond, Washington

A youngster with a disdain for wealth, distrustful of Wall Street bankers, suddenly scores millions of dollars for himself and his hacker friends. Ah, Bill Gates was quite the story back in 1986. As Facebook winds down its first day of trading, here’s a look back on the drama of some of tech’s other—sometimes eerily similar—classic IPOs.

Apple (AAPL), Dec. 12, 1980

Apple wasn’t the first computer company to go public, but it set the bar for Silicon Valley wunderkinder. Not to mention making lots of money for lots of people (including Forrest Gump). The nearly 4-year-old company went public at $22 per share; adjusted for subsequent stock splits, that’s $2.75. Today it trades around $540. The share price rose 30 percent on the first day. Steve Jobs, age 25, was instantly worth $256 million. The shares made millionaires of 300 people that first day—but not all were Apple employees. As recounted by Walter Isaacson in Steve Jobs, the CEO refused to give stock to his close college friend and longtime employee Daniel Kottke, despite the pleas of co-workers. Co-founder Steve Wozniak, on the other hand, sold a couple thousand of his own shares at low prices to mid-level Apple workers. “Most of his beneficiaries made enough to buy a home,” Isaacson notes. His stinginess aside, Jobs soon was plastered on magazine covers and inspired a generation of tech innovators.

Eagle Computer, June 8, 1983

Eagle was one of the hottest sellers of PC “clones”—the desktop computers built with the same architecture as IBM’s machines. And its IPO briefly made company President Dennis Barnhart a millionaire. Then tragedy struck and Eagle became a cautionary tale for fleeting IPO fortunes. Hours after the IPO, Barnhart, 40, was killed when his red Ferrari crashed through a guard rail and into a ravine a block from company headquarters. A yacht salesman who was riding with him survived. Trading in Eagle’s shares halted. But the car crash didn’t kill Eagle; that was accomplished later by a sustained IBM legal assault against the clone makers.

Microsoft (MSFT), March 13, 1986

Six years after Apple’s stock offering, the IPO extravaganza had become a rite of passage for young tech stars. Several themes in the Microsoft IPO seem familiar today: The outsize wealth of the founders—$350 million that first day for Bill Gates, then 30, a young CEO with no taste for baubles but an intense desire to retain control of his creation. And a big (32 percent) opening-day trading pop, from Microsoft’s $21 IPO pricing to its $27.75 close. Five years later, Microsoft had returned 1,336 percent. Indeed, the sterling IPO Class of 1986 (PDF)—which included Oracle (ORCL), Sun Microsystems, Adobe (ADBE), and Silicon Graphics (SGI)—would lead the way out of a mid-’80s tech slump.

theGlobe.com, Nov. 13, 1998

Long before Facebook was theGlobe.com, another startup that brought like-minded people together, caught fire with users, gained millions in private financing, and rocketed out of the IPO gate. Nothing quite captures the mania, audacity, and eventual ridiculousness of the dot-com bubble like the tale of this proto social network. Started by two Cornell students, Stephan Paternot and Todd Krizelman, theGlobe—like many of its bubble brethren—had little in the way of sales ($2.7 million over the nine months before the offering) and no profit. But with the IPO the founders were suddenly worth $70 million each. Footage of Paternot dancing on a nightclub table in shiny leather pants quickly came to symbolize dot-com excess. TheGlobe’s share price collapsed a year later, along with the rest of the Nasdaq, and the main part of the business shut down in 2001.

Google (GOOG), Aug. 19, 2004

Google was supposed to be the IPO to change all IPOs. It wasn’t; the Dutch auction of shares, seen by founders Larry Page and Sergey Brin as a way to wrest some control of share pricing from the bankers, confused many investors and never caught on as a tech industry standard. But those who bought the shares and held them weren’t disappointed. A year and a half after IPOing at $85, the stock had quintupled, creating an estimated 1,000 millionaires and five billionaires. The sheer weight of its wealth distorted the Valley’s economy; as Roben Farzad wrote in December 2005: “Instead of nurturing the most promising startups with an eye toward taking the fledgling businesses public, a growing number of VCs now scour the landscape for anyone with a technology or service that might fill a gap in Google’s portfolio. Google itself and not the larger market has become the exit strategy as VCs plan for the day they can take their money out of their startups.”

Daniel_beucke
Beucke is the News Director at BusinessWeek.com

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Companies Mentioned

  • AAPL
    (Apple Inc)
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  • MSFT
    (Microsoft Corp)
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