I will never sell a piece of this company to the public.
Philip Knight co-founder and CEO of Nike Inc. says many times throughout his memoir.
In his excellent memoir “Shoe Dog”, Phil takes the reader on his lifelong journey of creating one of the largest consumer good companies in the world. He discusses his journey as a runner for the University of Oregon with their legendary track coach Bill Bowerman. The company was founded on January 25, 1964, as Blue Ribbon Sports, by Bowerman and Knight, and officially became Nike, Inc. on May 30, 1971.
Inadequate running shoes was the problem that needed to be solved. So, the two of them teamed up to develop a better running shoe. Fortunately for them, the United States was about to embark on a running frenzy.
He speaks of the years of struggle as he tries to develop, produce and sell the sneakers. With growth, he needed capital to be able to develop inventory to place in the stores for consumers to buy. As with most products, money needs to be spent up front to develop the product and then ship the product to various locations for sale.
The man who moves a mountain begins by carrying away small stones – Confucius
Initially, local banks were willing to provide some of the financing. However, as the enterprise grew, so did the need for larger inventories and a larger workforce, and the need for even greater capital. The banks were unwilling to be on the hook if the sneakers could not be sold and thus the bank loan would not be repaid.
This is a familiar story with entrepreneurial startups. How does a company secure such financing? The idea of selling to the public was raised again.
In 1976 the management discussed “going public”. From the book – “We decided – No way. Never. We would never go public. It would mean the loss of control, and may mean answering to strangers many of whom would be large investment firms.”
Therefore, the owners of the fledgling company (like many entrepreneurs) relied on family and friends. Companies also rely on venture capitalists who come in with needed capital but also with expectations of some management control and the desire for significant ownership.
These sources of funding were not enough to keep pace with the significant growth of the company as they continued to get endorsements and sign deals with many high-powered athletes. Ultimately, like so many of the great companies around the world, they turned to the public stock markets and sold a piece of this incredible company. The selling of the initial shares to the public is called an initial public offering or IPO.
Thus, investors throughout the world were given the opportunity to own a company that had grown significantly and withstood the many challenges of a brand new company to become profitable.
In 1980, Nike had attained a 50% market share in the U.S. athletic shoe market, and the company went public in December of that year. “Finally, management decided going public would allow Nike to live on.” On the night of the initial public offering, Phil Knight went to bed worth $178 million …. just the beginning. As of August 2018, Knight was ranked by Forbes as the 28th richest person in the world, with an estimated net worth of $34.7 billion.
As stock investors in Nike, we did not have to take on the initial risk regarding the company’s early fate. However, like many of the great companies, the need for capital (money) resulted in a great benefit for the investing public.
Unlike the original owners, we did not have to carry the initial stones to create the mountain. The company was already a profitable operation when we provided our capital to allow them to reach greater heights.
The company takes its name from Nike, the Greek goddess of victory. Nike ranked No. 89 in the 2018 Fortune 500 list of the largest United States corporations by total revenue. It has approximately 74,000 world-wide employees.
Investors need to appreciate the greatness of this company and the thousands of other companies with similar stories around the world. Invest long-term in the success of these great companies for your own success. Or as their slogan says:
Just Do It!
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