Shareholder Letter

Shareholder Letter

Investopedia / Jiaqi Zhou

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 at the beginning of the firm's annual report and can usually be found in the investor relations section of a company's website.

Key Takeaways

  • 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.
  • Typically, a shareholder letter precedes the company's annual report or financial statements.

Understanding Shareholder Letters

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.

Even accounting for potential skews or positive spins in a company's shareholder letter, the shareholder letter is still a valuable resource in getting a sense of the outlook of executives—primarily the Chief Executive Officer's—of how well a company is doing. Many times, investors will dive deep into the shareholder letter to forecast or reason why the firm is doing better or worse than anticipated.

Examples of Shareholder Letters

The shareholder letters of publicly-traded companies are available for investors and non-investors alike to view. Two of the most anticipated shareholder letters each year come from Warren Buffett's lucrative Berkshire Hathaway Inc. (BRK.ABRK.B) company, as well as from e-commerce giant For example, the key takeaways from Warren Buffett 2019 letter include advice to focus on the company's operating earnings, the power of long-term equities, and understanding the acquisition track record of the company.

Meanwhile, in Amazon's 2020 shareholder letter, outgoing CEO Jeff Bezos shared everything from the membership of its popular Amazon Prime service, to the value Amazon has created for various stakeholders. Designed to be a personal statement of sorts from company leadership to its shareholders, the shareholder letter from Jeff Bezos also included a short story from his life to help illustrate a business concept. Ultimately, executives can communicate whatever they feel is best in order to appease and please its shareholders.

Article Sources
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  1. Berkshire Hathaway. "2019 Shareholder Letter," Accessed July 20, 2021.

  2. Amazon. "2020 Letter to Shareholders." Accessed July 20, 2021.