My 5th Grade IPO

This past Friday, I visited my daughter’s class as part a lecture series on financial matters delivered each week by a parent volunteer. As a foremost self-published commentator on financial matters, it was only natural that I would volunteer. As a non-expert, it only made sense that I would discuss the topic of the Tel Aviv Stock Exchange (“the bursa”).

I’m not sure where we are going wrong with our education system, but it apparently happens sometime after the 5th grade.

Brainstorming

To describe the purpose of a stock exchange, I asked the class to come up with an idea for a business. Most of the girls did not have one, but many did. Most of the ideas were for hi-tech start-ups. I take this as evidence that girls are definitely interested in business and engineering as professions. In fact, one girl said that she wants to make a start-up and doesn’t care what it does as long as it makes “billions of dollars.”  

It was also very heartwarming to hear from two girls in the class who are planning to create a company that will help sick people. They have given this a lot of thought; but unfortunately, I did not catch all of the details. From what I could understand, a key part of their strategy involves something to do with making sweaters.

In any case, we spent the session brainstorming about our start-up and how to raise money for it. These girls thought of everything, which makes me wonder at exactly what point in their lives people stop thinking. I’ve run similar brainstorming sessions with adults and can barely get half as many good ideas.

We decided that our start-up is going to make shoes that help people jump really high AND run really fast. We thought of everything you need, both the obvious (springs, factories, machinery), as well some of the less obvious, including: a good design team for both the shoes and for our corporate logo.

IPOs

We discussed how to raise money to get our company started, which led us to the discussion of how we could sell shares of the company on the stock exchange.

Now, this is a fairly complicated concept and I wasn’t sure how it would go over. Actually, several of the girls made it quite clear that it really doesn’t make sense to own a “part” of a company. Which part, exactly, do you own?

However, as we elaborated on how once you own a “part” of a company, you also get “part” of the profit that the company makes, things really clicked. They were especially interested to know which companies I personally owned, and I promised to send them a link to the I-PRAY index.

The conversation around buying and selling stock became quite intricate, and we discussed how the price will go up and down when more or less people want to buy shares in the company. Here are two actual questions raised by the 5th graders:

• Once you have shares, anyone can buy them. This is just like the Chinese who bought Tnuva. Why did they do that?
• The amount of money that you get back from owning Bezeq doesn’t sounds worthwhile. Why don’t you sell it?

These are very good questions, and you may be wondering about the answers. I certainly am. Unfortunately, they were asked on purpose which makes it impossible for me to answer them.

In any case, this is your fair warning. If you see a 5th grade girl in Modiin, she probably knows more about the stock exchange than you do.