These Corporate Giants Are Finally Acknowledging Investors

Amazon's (AMZN) CEO made waves recently... by talking to his shareholders.

For public companies, it may seem obvious that effective communication with investors is critical. It helps maintain transparency and builds trust and confidence in the business.

But some ultra-successful companies have forgotten why they're so successful in the first place.

In Amazon's case, founder and former CEO Jeff Bezos notoriously skipped every earnings call since 2009. Current CEO Andy Jassy kept up the tradition... until last month. Jassy surprised analysts by joining the company's fourth-quarter call to reassure investors in the face of layoffs and plunging shares.

A few weeks ago, we explored how important candor is for management. Candor involves open, honest communication. And that's exactly what a lot of the biggest businesses have turned their backs on.

As we'll explain today, these companies took their shareholders for granted for far too long. Now, they're facing a reckoning.

Companies always turn back to investors when times are bad...

Bezos and Jassy weren't the only executives who couldn't be bothered to acknowledge their investors. The CEOs of retail giant Costco Wholesale (COST), oil major ExxonMobil (XOM), and consumer-staples leader Unilever (UL) have all skipped earnings calls recently.

And other executives completely skipped their annual investor days – some of their most important events of the year.

Investor days are another time for management to communicate its strategy and talk directly to investors. But companies like electric-vehicle maker Tesla (TSLA) and investment bank Goldman Sachs (GS) went years without investor days.

It didn't seem like investors cared, either. Goldman's stock was up more than 150% from its pandemic low through the end of 2022. Tesla was up 411%... even with the downtrend late last year.

But we've had a tumultuous start to the year, and even these "masters of the universe" have realized they can't get away with leaving investors high and dry.

That's exactly what's happening at Tesla and Goldman Sachs. They recently held investor days one day apart. That's not a coincidence. It was only Goldman's second ever investor day... and it was Tesla's first.

The past few weeks of bank failures have led to a lot of scrutiny toward bank stocks like Goldman. And as for Tesla, the chart below explains why investors are concerned... The stock fell from $380 per share in April 2022 to $110 per share at the beginning of 2023.

Take a look...

Tesla stock has been under serious pressure. The company started discounting its cars because demand was slowing down. And investors were worried that Elon Musk's Twitter acquisition was distracting him.

Now, Tesla is backpedaling to calm down analysts and shareholders.

Elon Musk and the whole management team met with analysts, explained what went wrong, and answered questions in an extremely long investor day.  

Investors didn't seem too happy with Tesla after its investor day. Shares fell 6% the next day.

For these companies, it may be too little, too late...

One investor day doesn't fix years of poor communication. Management is trying to right the ship, but it's too early to tell whether they can win back investor trust.

What's happening with companies like Amazon, Goldman, and Tesla is an important reminder... Pay attention to how management treats investors.

Candor has a demonstrated correlation with stock performance. Companies with the most candid management teams tend to have better stock performances in the long term. It's not something they can manufacture when it's convenient.

When you're assessing candor, it's just as important to study how management communicates over time. Companies like Tesla and Goldman finally got around to holding investor days... but years of silence speak volumes.

Don't just look at what management is saying. Look at how its communication changes over time. What management chooses to stay quiet about – and when – can tell you a lot about the business.

Regards,

Rob Spivey
March 23, 2023