What Is a Shareholder Letter?

A shareholder letter is a letter written by a firm's top executives to its shareholders to provide a broad overview of the firm's operations throughout the year. The letter generally covers the firm's basic financial results, its current position in the market, and some of its plans. It can also speak to specific events that have happened throughout the year, changes in the company's stock price, or reiterate aspects of its vision. It's a chance for the executives of a firm to speak directly to shareholders. The shareholder letter is generally written once per year and is included in the beginning of the firm's annual report and can usually be found in the investor relations section of a company's website.

Shareholder Letter Explained

The shareholder letter can be a good first step toward getting a broad overview of a firm that you are analyzing for investment. However, it is important to understand that the shareholder letter, along with many other parts of the annual report, is normally written in a way to put the company's operations in the best possible light. Investors will want to take the information in the shareholder letter with a grain of salt and be sure to delve more deeply into the firm's financial results and perform independent research on the company and its industry before drawing conclusions. The letter may address specific items within the company's financial statements or filings such as the 10-K or 10-Q, so it can be a good idea to look for information within these documents that substantiate claims made within the shareholder letter.