When Amazon’s stock value dropped by 80 percent in 2020, Bezos reached out to shareholders by letter. What we can all learn from it.
When did Amazon lose so much value? In 2000, Amazon’s stock lost about 80 percent of its value in just a few months. A shock for investors. This is why Jeff Bezos wrote an open letter to all shareholders (those who owned stock).
How is Amazon doing today? Recently, the stock of Jeff Bezos’ company also dropped significantly in value, from about 170 euros at the beginning of August to about 150 euros on August 9, 2024. Therefore, it is worthwhile to take a look at the fascinating document regarding Amazon’s history – and to learn from it. Generally, the global corporation is not in a crisis.
Today, Amazon as a corporation offers far more than just products in online retail. They are also a global giant in series and films.
Stay calm, the billions are only temporarily missing
What did Jeff Bezos write to investors? He primarily referred to a quote from economist Benjamin Graham, who is considered a mentor to Warren Buffett. The latter is a legendary investor who strictly aligned his actions according to a principle of his teacher, which Bezos also referred to at that time:
Short-term, the market is a voting machine, but in the long run, it is a weighing machine
What does this mean? In brief, it means for companies: Markets can easily err in the short term and “vote” incorrectly, but in the long term, they function and reveal which companies manage to establish themselves because their business model is solid and future-oriented.
Bezos interpreted the statement in this way and pointed out that Amazon should be doing economically well and that the stable foundation should continue to be expanded. Even if the stock price falls, things are going very well internally. To maintain the image of a weighing machine as a display of success, he wrote: “We want to make the company heavier” – and he succeeded. Today, Amazon is one of the most significant companies in the world. You can find the complete letter in English here as a PDF (via document archive).
What can we learn from this in general? Anyone who deals with economic contexts, whether professionally or privately, should keep one thing in mind according to Bezos: It is about long-term development that builds a solid foundation for a project, a company, or whatever. In the short term, many things may look relatively bad, which may turn out to be a complete success months or even years later.
Where was the stock at the beginning of the 2000s? Back then, it was only a few euros per share. It wasn’t until 2013 that Amazon broke the 10-euro mark. Nevertheless, the drop was drastic and worried investors. You can view the exact values here on Yahoo Finance.
In 2022, there was also a significant drop in the stock price – however, this resulted from a stock split. In this process, the value of each share is reduced, but the number in all shareholders’ accounts is correspondingly increased, for example, “value divided by 20”, but “number also multiplied by 20”. Therefore, no shareholder loses assets, but the price is at least temporarily lower, which should attract new investors. You can read more about it, for example, at Forbes.
Above you can find more content about people who have made it far with their companies. And for those who want to know how Jeff Bezos organized Amazon internally to grow relatively quickly without overextending themselves, we have something: In the following article, we explore one of the strategies: Amazon CEO Jeff Bezos’ recipe for higher productivity is simple: two pizzas
