First an admission. I have never used Snapchat. Despite that, I thought their upcoming IPO would be a good hook to get students interested in how the stock market works. Before diving into the specifics of Snapchat (actually it is their parent company, SNAP, who is going public), here’s a good video from Wall Street Survivor that explains what an IPO is:

Questions:

• Describe in your own words, what an Initial Public Offering (or IPO) is.
• What role does an investment banker play in the process?
• Who determines the IPO price and the number of shares that the company offers in an IPO?
• Who gets the money that is raised through an IPO?

2. Next, have your students complete a web quest to find 3-4 articles that analyze the Snapchat IPO. As they read, have them list the pros/cons of the offering and also find three data charts in these articles and provide one takeaway from each chart. Here’s a few articles that can get them started:

• A Modest Parable About Snapchat’s IPO (Bloomberg, 4 minutes)
• Snap Lowers Valuation Expectations in Highly Awaited IPO (Reuters, 4 minutes)
• Snap’s IPO Will Be The Largest In Years (Economist, 9 minutes)

3. Decision time (which should come BEFORE their IPO date in early March): Would you invest in Snapchat if you could buy at the IPO price? Recall that “hot offerings” will usually pop in their first day of trading but investment banks tend to limit who gets access to “hot IPOs” so the general public is typically shut out.

• On the day of the IPO, have them compare the closing price of Snapchat with the IPO price and calculate the percentage difference between the two prices. Based on your analysis, was this a good IPO or not?
• What do you think is the right timeframe to ascertain whether an investment in Snapchat (or any investment for that matter) is worthwhile?
• Why do you think IPOs are such exciting events?

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Looking for a project to simulate the psychology of buying and selling stocks? NGPF has a great project, Ravioli Den, which has gotten rave reviews from teachers.

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.