When Amazon’s share price plummeted by 80 percent in 2020, Bezos wrote a letter to shareholders. What we can all learn from this.
When did Amazon lose so much value? In 2000, Amazon’s stock lost around 80 percent of its value within a few months. This was a shock for investors. That’s why Jeff Bezos wrote an open letter to all shareholders (all those who owned shares).
How is Amazon doing today? Recently, the shares of Jeff Bezos’ company also lost a lot of value, from around 170 euros at the beginning of August to around 150 euros on August 9, 2024. It is therefore worth taking a look at the document that is so exciting for Amazon’s history – and learning from it. Because in general, the global corporation is not in a crisis.
Nowadays, Amazon as a corporation offers much more than just online items. They are also a global giant when it comes to series and films.
The official trailer for the Fallout series on Amazon in German
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Keep calm, the billions are only missing in the short term
What did Jeff Bezos write to investors? He first and foremost referred to a quote from the economist Benjamin Graham, who is considered Warren Buffett’s mentor. The latter is a legendary investor who acted strictly according to a principle of his teacher, which Bezos also referred to at the time:
In the short term, the market is a voting machine, but in the long term it is a scale
What does that mean? In short, for companies, this means: The markets can easily make mistakes in the short term and “dial the wrong number”, but in the long term they work and show which companies manage to establish themselves because their business model is solid and forward-looking.
Bezos interpreted the sentence in the same way at the time, pointing out that Amazon is doing extremely well financially and that the stable base should be further expanded. Even if the share price falls, things are going well internally. To stay with the image of a scale as an indicator of success, he wrote: “We want to make the company heavier” – and he succeeded. Today, Amazon is one of the most important 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 issues professionally or privately should, true to Bezos, keep one thing in mind: It’s about long-term development that builds a solid foundation for a project, a company or whatever. In the short term, many things can look relatively bad, but months or even years later turn out to be a complete success.
Where was the stock actually at the beginning of the 2000s? At that time, it was only a matter of a few euros per share. It was not until 2013 that Amazon broke the 10 euro mark. Nevertheless, the collapse was blatant and worried investors. You can see the exact values here on Google’s financial portal.
There was also a sharp drop in the price in 2022 – but this was the result of a stock split. In this case, the value of the individual share is reduced, but the number in all shareholder portfolios is increased accordingly, for example “value divided by 20”, but “number times 20”. This way, no shareholder loses assets, but the price is at least temporarily lower, which should attract new investors. You can find out more about this at Forbes, for example.
Above you will find even more content about people who have made it far with their companies. And if you want to know how Jeff Bezos organized Amazon internally in order to become so big relatively quickly without overextending himself, we have something for you: In the following article we will look at one of the strategies for this: Amazon boss Jeff Bezos’ recipe for higher productivity is simple: two pizzas