What is a shareholder letter?
A letter to shareholders is a letter written by the top executives of a company to its shareholders to provide a broad overview of the company’s operations throughout the year. The letter generally covers the company’s basic financial results, its current market position, and some of its plans. You can also talk about specific events that have happened throughout the year, changes in the company’s share price, or reiterate aspects of your vision. It is an opportunity for company executives to speak directly with shareholders. The letter to shareholders is usually written once a year and is included at the beginning of the company’s annual report and can usually be found in the investor relations section of a company’s website.
- A letter to shareholders is a letter written by the top executives of a company to its shareholders to provide a broad overview of the company’s operations throughout the year.
- Typically, a letter to shareholders precedes the company’s annual report or financial statements.
Understanding of shareholders’ letters
The shareholder letter can be a good first step in getting a broad overview of a company you are looking to invest in. However, it is important to understand that the letter to shareholders, along with many other parts of the annual report, is usually written in such a way that the operations of the company are viewed in the best possible light. Investors will want to take the information in the shareholder letter with a grain of salt and make sure they dig deeper into the company’s financial results and conduct independent research on the company and its industry before drawing conclusions. The letter may address specific elements within the company’s financial statements or filings such as the 10-K or 10-Q, so it may be a good idea to search for information within these documents that corroborates the claims made within the letter to shareholders.
Even taking into account the possible biases or positive twists in a company’s shareholders letter, the shareholders letter is still a valuable resource to get an idea from the perspective of the executives, mainly the CEO, of how well he is doing. going to a company. Often times, investors will delve into the shareholder letter to forecast or explain why the company is doing better or worse than anticipated.
Examples of shareholder letters
Shareholders’ letters of publicly traded companies are available for both investors and non-investors to view. Two of the most anticipated shareholder letters each year come from Warren Buffett’s lucrative Berkshire Hathaway Inc. (BRK.A, BRK.B) as well as e-commerce giant Amazon.com. For example, key takeaways from Warren Buffett’s 2019 letter include tips for focusing on the company’s operating earnings, long-term equity power, and understanding the company’s acquisition history.
Meanwhile, in the 2020 Amazon shareholder letter, outgoing CEO Jeff Bezos shared everything from membership to his popular Amazon Prime service, to the value Amazon has created for various stakeholders. Designed to be a kind of personal statement of the company’s leadership to its shareholders, Jeff Bezos’s shareholder letter also included a brief life story to help illustrate a business concept. Ultimately, executives can communicate what they consider best to appease and please their shareholders.