Question: What Happened To Snapchat (The Investment)?

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May 17, 2017
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Stocks, Behavioral Finance, Question of the Day, Research, Investing, WebQuest, Current Events

Investors loved the IPO (shares shot up from IPO price of $17 to $29 at one point on the first day of trading) but when it came time to announce their first quarterly results as a public company, well….I will let the chart from YahooFinance do the talking:

Ben Carlson, a blogger, titled a recent blog post on this disappointment: A Good Lesson For Millennial Investors. So, what did it teach them?

It’s still too early tell whether Snapchat will be a successful investment or company but this will serve as a good lesson for these first-time investors. More experienced investors may be tempted to mock these youngsters for their missteps — and many have — but I think it’s a great thing that Snap is getting millennials more interested in the stock market. It’s better to take your lumps when you’re young, inexperienced and have much less money at stake. That’s when you want to make your mistakes and learn about how you deal with seeing your savings evaporate before your eyes.

Learning how to take a loss is a huge part of the learning process. The worst thing that can happen for most inexperienced investors is to see success early on with their investments. Early success in this game can make it seem easy when investing is anything but. Lost savings should be thought of as tuition paid.

So, glad that $1,400 investment that I made in CheckRobot in the fall of 1989 went to $700 a few months later…that was enough tuition to get me interested in mutual funds and eventually index funds.

Send your students out on a webquest in search of the answers to these questions:

  • What happened to Snapchat’s stock? Name at least three reasons why their stock price dropped on May 10th.
  • Do you think these reasons are short-term and temporary or long-term and worrisome?
  • Would they buy the stock after the drop? Why or why not?

__________

Want your students to experience the ups and downs of trading an individual stock? Check out this popular NGPF Activity: Joining the Market (a.k.a. Ravioli Den)

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.