When Amazon Shares Fell 80% In 2000, Here's What CEO Jeff Bezos Told Shareholders

Amazon.com, Inc AMZN shares are priced well above the $3,000 mark today but that was not the case at the beginning of the new millennium. 

In fact, between 2000 and 2001, the company’s shares plunged sharply by over 80% and it was at such a time that the company’s founder Jeff Bezos penned a letter to shareholders. Here’s what he had to say.

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Oh The Pain: “Ouch!” was the word Bezos used to commiserate with shareholder pain, acknowledging that it had been a “brutal year” for them.

Between Bezos' annual letters to shareholders, the shares of Amazon plunged from $72.69 on March 24, 2000, to $10 on March 21, 2001 — that’s a steep fall of over 86%.

Focus On Strength: Bezos’ letter, recently shared by Bloomberg TV personality Jon Erlichman on Twitter, quickly moved on to focus on Amazon’s strengths.

He reminded the shareholders that the number of customers served by the e-commerce firm had risen from 14 million to 20 million. Bezos touched on shrinking losses and growing international sales in his missive.

Bezos said the most important development was the company obtaining a record score on the American Consumer Satisfaction Index.

Stock Market As A Machine: Bezos turned to the investor, economist and professor Benjamin Graham to explain why the company’s shares declined even when it was better positioned than in the past. 

“‘In the short term, the stock market is a voting machine; in the long term, it’s a weighing machine,” wrote Bezos. 

The entrepreneur said in 1999, a boom year, there was a lot of voting going but not as much weighing.

“We’re a company that wants to be weighed, and over time, we will be—over the long term, all companies are. In the meantime, we have our heads down working to build a heavier and heavier company,” said Bezos.

Gain Weight — They Did: Bezos, who hung up his boots as CEO of Amazon in July last year, is the second richest person today behind Tesla Inc TSLA CEO Elon Musk. He is worth $188 billion.

In his final letter to shareholders, Bezos listed the company’s achievements like creating 500,000 jobs in just one year and the fact that the company generated $21.3 billion in net income. It generated $21 billion in shareholder profits.

If an investor purchased  $100 worth of Amazon shares on the day Bezos penned his “Ouch!” letter, they would have $31,084.43 at press time — an annualized growth of 31.42%; that's a significant 'weight.'

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Photo: Courtesy of Dan Farber via Flickr