Letters to Shareholders

Every stakeholder can learn about their investment’s performance over a year. It gives them peace of mind about a company’s financial performance and details about its prospects. 

Companies must create and distribute proper letters to shareholders to inform them about their organization’s performance during the previous year. This official letter is vital in informing about the company’s performance and prospects that might benefit its operations. 

However, only a few professionals know how to draft a shareholder letter. Complete knowledge helps you improve a shareholder’s confidence in the company. For example, business owners often use a CEO letter to shareholders.

Usually, a firm’s top management team is responsible for drafting shareholder letters. Communicating effectively and regularly with the respective shareholders is a good practice to retain their confidence and trust. 

These executives can speak directly to the shareholders and brief them on the company’s operations and market conditions. They share this letter yearly with the annual report to provide shareholders. This blog is the perfect place to learn everything about writing official shareholder letters with precision and professionalism. 

Individuals want to become shareholders in a company because they expect the organization to become successful and make money. The firm must respond to social and environmental issues.

A professional shareholder letter consists of executive compensation and the selection of the board of directors. Investors are becoming more vocal and active in questioning companies they own. 

Monthly or quarterly shareholder letters are necessary to summarize your company’s activities and resolve shareholder concerns. 

Professionals must include several components in all their shareholder letters. It provides complete information about the firm’s financial performance, operations, and prospects. 

These are some common areas; 

Achievements 

In our shareholder letter, we must highlight the company’s top achievements from the last year. Some firms even include achievements they expect to achieve in the current year. 

Investors need this information to better understand their investment’s current and future performance. The achievements section also details plans regarding achieving revenue goals or opening new facilities. A single accomplishment could be influencsing millions of people globally. 

These are some key accomplishments you may add in your letter to shareholders; 

• Product launches
• Stock price increases
• Innovations
• New acquisitions
• New market entry
• Patent acquisitions

The achievement section heavily depends on the type of industry and company. For example, a technology company might emphasize innovations and patent acquisitions more. They could emphasize the latest technologies like artificial intelligence or blockchain. 

Financial Records 

This letter section highlights a company’s financial results from the previous operating year. Shareholders need this information to evaluate their investment performance. 

For this portion of the document, you must consider your sales revenue and profits from business operations. Some firms separate this information by the regions or states where they function. 

You may also provide a comparison with other years to show your company’s financial progress. Shareholders love detailed financial information from these letters. 

Plans and Measures 

Companies need this section to inform shareholders about how they are improving performance during a particular year. Professionals explain how they can remain competitive in the market and industry. 

For example, they might highlight specific innovation projects or acquisitions that contribute to improving operations. 

A company should also try to include information about upcoming plans and projects that might further improve operations. It includes key performance indicators (KPI) projects or capital expenditures. 

You must explain how these projects or expenditures might improve your overall performance. It shows that you will continue to grow in the future. 

Market Conditions 

The current market conditions might heavily influence a company’s performance. Companies often discuss how they are navigating through the market conditions that affect their operations. 

They also mention how they adapt or change to reduce the impact of evolving market trends. For example, a firm would explain how it remains open and profitable during low demand or recession. 

Shareholders know that every market is volatile and might impact their investment performance. Professionals do everything they can to explain how they adapt to changes. 

Acknowledgments

The shareholder letter’s final section recognizes all company stakeholders’ contributions. They usually mention their names or addresses by the stakeholder’s organization. 

Companies must recognize the contributions of the following stakeholders in their success; 

• Employees
• Suppliers
• Vendors
• Shareholders
• Creditors

We cannot ignore the importance of these shareholder letters in publicly traded companies. It is mainly necessary for two primary reasons; 

To Gather New Investors 

Investors are the foundation of every profitable business in the 21st century. Shareholder letters help organizations to explain their operations and performance to new investors. 

These shareholders need a proper document to understand a firm’s reputation, leadership, and potential to drive growth. Shareholder letters also work as a progress report for current and future investors. It gives an organization a complete track record of its finances and future goals. 

The vital information from these letters signals strong growth and profitability. Investors consider these factors while investing in a company. 

Many firms publicly make their shareholder letters available, making it easier to attract new investors and shareholders. 

To Boost Shareholder Confidence 

The primary goal of shareholder letters is communicating with existing shareholders about an organization’s recent events and financial performance. These stakeholders are an integral part of a firm’s functioning. 

They have vital ownership in the organization, so they naturally show concern about the company’s performance for the previous year. 

A shareholder letter is a critical document that helps build trust in the organization and demonstrates integrity. By using this document, shareholders increase their confidence in their investments. 

Good financials are necessary for shareholders to expect better performance in the future. It reflects an increase in their shareholder value. 

Many professionals confuse between a shareholder letter and a quarterly report. They might have similar information, but these documents are different in the following ways; 

A company’s executives prepare the shareholder letter to the shareholders. It summarizes the organization’s performance and what to expect in the reports. This letter is necessary for companies to address issues that might impact the organization and the plans for the upcoming years. 

A quarterly report is a structured document that follows the Securities and Exchange Commission (SEC) guidelines. It provides critical financial statements and an overview of a company’s performance, such as profits, revenue, sales, market share, etc. Professionals also popularly refer to it as 10-Q.      

A company’s top executive is usually responsible for writing shareholder letters. It often consists of the chief executive officer (CEO), the chief financial officer, the chief operating officer (COO), and the organization’s secretary. 

An effective shareholder letter requires input from multiple top-level executives. They must send this letter by the end of the year. It provides a high-level summary of every event over the year. 

This information concerns the shareholders about their investments. These professionals write these documents once a year with an annual report. It gives them the golden opportunity to brief the shareholders directly on the organization’s operations. The following distribution methods are popular for disseminating this letter; 

• Email communication
• Direct mail
• Publishing public domain
• Uploading to the organization’s website

Experts often suggest particular tips while drafting letters to shareholders. Following these best practices are necessary to create comprehensive and professional-looking documents; 

Keep the Letter Concise 

It is pointless to stretch your letters only for the sake of writing unnecessarily. Most shareholder letters have one or two pages. Consider a letter to the shareholder’s example to understand the precise format and length. 

A concise letter always engages the shareholders as you only include vital information that they expect from you. These details must display your organization’s performance. 

Remain Consistent With Your Writing 

Each shareholder letter from your firm must follow a similar format. Consistency is necessary to let shareholders analyze your organization’s performance and to help them easily compare information from previous years’ letters. 

Ensure Complete Accuracy 

Accuracy is everything when drafting a letter to shareholders. Any wrong information can lead to fines or legal trouble. Ensure you provide the company’s most current performance before publishing and distributing. 

A robust review process can help you discover and correct errors before sending them to your shareholders.

They won’t welcome your mistakes, so you must take proper steps to ensure accuracy. Big companies manage hundreds of millions of accounts with complete precision. 

Other Tips You Should Consider While Drafting Shareholder Letters

• Don’t over-describe your business activities in the letter. You must try to highlight your organization’s achievements.
• Give a peek at what your investors may see in the future. It builds anticipation and engagement towards your brand. For example, talk about the milestones your firm intends to achieve in the following year and plan to achieve them. Be reasonable and realistic while talking about the milestones.
• You must appreciate and show gratitude to your employees or the executives. They and investors must know that the company values its employees. Highlight the commitment towards ethical issues, corporate governance, and efforts to contribute to sustainability. For example, many companies want to innovate their business with clean energy. 
• Investors often need to recall how the company runs the business and its overall purpose. You can mention the processes of how you run your business in the shareholder letters.
• It is expected to face problems during the year. Acknowledge them and mention them in your letter to the shareholders. You can also talk about the factors which led to those problems in the first place.
• A letter to shareholders must explain the potential risks, challenges, and uncertainties that the organization is facing. Investors appreciate it when you are transparent about this information.
• Refer to an example of an annual letter to shareholders for a better understanding. It gives a clear picture of market conditions, current trends, competition levels, present position in the industry, and other issues. You can also display your efforts to retain the current market and develop a new customer base.
• A shareholder letter is an essential tool in the corporate world. Businesses need it to create faith and effectively communicate vital information to shareholders. Investors also consider companies that are more transparent and open with their financials and performance.
• A shareholder letter allows leadership to educate investors about the company’s identity and values. They get to know your leadership’s vision for the future.
• Shareholders must understand your company’s values, accomplishments, culture, and challenges. It provides a better context for the company’s past performance and future scope.
• There are no specific guidelines by the SEC on shareholder letters. However, companies should try to consider SEO guidance from similar documents. This guidance is necessary to ensure “a balanced view of the underlying dynamic of the business.”
• The use of excessive promotional language can undermine important information. It could even present your organization in a harmful or misleading light.
• A letter to shareholders provides a more personalized context and perspective for the organization’s performance and results.

Most companies need more time and resources while manually distributing shareholder letters. It is often daunting to prepare and send physical letters to shareholders. In contrast, digital solutions are much easier to manage, even for a small team of professionals.  

However, physical letters have a different charm and professionalism. We cannot ignore their importance among shareholders. An automated solution like PostGrid print & mail API can send personalized letters, postcards, and checks at any scale. 

Our API allows unlimited sending possibilities to mail critical communication material to stakeholders. Many businesses prefer our print & mail solution to send communication and marketing materials with full automation. 

It is a much better option than managing the mailroom manually. There’s no need to hire a dedicated staff or buy expensive equipment to print and mail your communication materials. You can manage everything from our dashboard for swift and efficient offline campaigns. 

Easy Integration Options 

Quick integrations are essential for saving time and effort. You can easily integrate our API with almost any CRM, marketing automation tool, etc. 

Creating automated workflows gets much easier when you have swift integrations. The API pulls data from your software systems directly to eliminate the need for manual entries. 

You only write the shareholder letter, and the automation auto-populates the document. PostGrid’s Zapier Integration connects our sending capabilities to over 1600 apps. 

HTML Editor for Full Customization 

Customization in your communication collaterals is necessary to improve brand awareness. Use our built-in HTML editor to fine-tune your shareholder letters with branding elements and stand out. 

It allows you to customize layouts, colors, and fonts and include your brand logo in various documents. The interface is easy to use, with drag-and-drop elements even for an amateur. 

There’s a template gallery to prepare your documents faster and more precisely. 

Complete Analytics and Tracking Features 

Keep an eye on all your mailers while sending them to any stakeholder. Our API gives you detailed analytics and tracking features. You can view logs of every sending activity from the dashboard. 

It even lets you track detailed metrics for the campaign performance with complete accuracy. Many companies use our API for their direct mail marketing campaigns. PostGrid provides helpful analytics like any email marketing tool. 

Regulatory Compliance to Keep You Safe 

You must follow some regulatory requirements while sending any critical official document. For example, shareholder letters also enforce specific requirements you need to adhere to. PostGrid and its partners are fully compliant with all legal frameworks and requirements. 

We handle your data most confidentially and securely. PostGrid uses Amazon web services to host its data with high security. 

Sign up now to send your shareholder letters using direct mail automation.