Amazon's IPO after 20 years: How you'd have profited

It was 20 years ago today when a money-losing Internet start-up rewrote the rules of going public. 

Amazon.com (AMZN) first sold shares to the public on May 15, 1997, ending the day with a market value of $438 million. At the time, the company was an online bookseller, although CEO Jeff Bezos already had much grander ambitions, as reflected by the company's name. Twenty years later, the company is involved in everything from cloud services to video streaming -- and its market value tops $465 billion. 

Early investors in Amazon would have been richly rewarded, although a lot of angst would have accompanied a buy-and-hold strategy. The online retailer's shares have been hammered during a number of crises, including the dot-com meltdown in 2001 and 2006's economic freefall. On a split-adjusted basis, Amazon's shares sold for less than $2 each in 1997, which means an initial $10,000 investment would now be valued at $4.9 million. 

Among the investors who missed out on Amazon's meteoric climb is Warren Buffett, who noted at his latest Berkshire Hathaway annual meeting that he was "too dumb to realize what was going to happen."

"It always looked expensive," Buffett said of Amazon earlier this month. "I never thought [Jeff Bezos] would be where he is today."

To be sure, Amazon wasn't a likely contender to overtake the likes of Walmart (WMT) in terms of market cap. The online startup was facing competition from entrenched bricks-and-mortar competitors such as Barnes & Noble, which was about to debut its own online store. Amazon was also losing money, posting a loss of $5.8 million in 1996.

Yet some analysts saw the potential for Amazon's growth early on, and recommended buying its shares despite its growing losses. Henry Blodget, then an analyst at CIBC World Markets, predicted in 1998 that Amazon's stock would reach $400 a share when it was trading at $230. Amazon's stock hit Blodget's target weeks later. (Blodget was later fined by the government for advising investors to buy stocks when he criticized them privately, and went on to create the business news site Business Insider.)

The risks aren't over for Amazon or its investors. The company is investing in expanding its services, and its profit margins "remain thin," according to an April research note from GlobalData Retail. Its $136 billion in 2016 revenue still trails Walmart's $486 billion from last year.   

Sustaining growth "will require Amazon to maintain its pace of innovation," wrote GlobalData analyst Neil Saunders. "While current trends suggest Amazon is more than capable of doing this from a technical and creative standpoint, we believe that such action will also constrain profit growth."