Investment Banking
{





List characteristics of an investment bank
Explain how an investment bank differs from a
commercial bank
Describe the functions performed by
investment banks
List methods for raising capital
Describe the evolution of investment banking
Objectives






Federal Securities Act
of 1933
Financial Holding
Company
Glass-Steagall Act
Gramm-Leach-Bliley
Act
Investment Bank
Initial Public Offering







Key Vocabulary
Maturity Date
Merger
Panic of 1907
Securities and
Exchange commission
Subprime Mortgage
crisis
Underwriting
Venture Capital

A few years ago you received a Play Station 3
for your birthday. You have the Dual Shock 3
controllers, almost 20 video games, and a few
Blu-ray movies to go along with it. Lately
you’ve wanted to upgrade by purchasing the
latest and greatest video game system;
however, before you can do that, you’ll need to
sell your own. You’re hoping to make at least a
few hundred dollars from the sale, but you’re
not quite sure how much to sell the package
for. What approaches could you take to learn
what it’s really worth?
Investment Banking
Services

There are certain characteristics that can
determine a system’s worth



What are those factors?
Investment banks are faced with similar
challenges of determining values
One of the services that an investment bank
provides is determining the worth or value of a
company
Investment Banking
Services




Variety of ways
Analyzing data to review the worth of
comparable companies
The current status of the company with regard
to products and services offered
Long-range plans for the future to ensure its
survival
Investment Banking
Services

Download: Reading- Introduction to
Investment Banks and Their Services


Predict what they think one of the main
functions of an investment bank will be
while they are reading they must accomplish the
following tasks


Underline the characteristics of an investment bank
(e.g., investment banks are financial institutions
that cater to the needs of companies, organizations,
and even the government)
Highlight specific services provided by investment
banks (e.g., investment banks research and analyze
a company’s worth)
Introduction to Investment
Banks and Their Services

The function of investment banking involves:




Capital raising methods
Mergers and acquisitions
Investment banks
Services are essential to maintain a growing and
healthy economy
Introduction to Investment
Banks and Their Services
Term
Category
Characteristics
A commercial
bank is a
Financial
institution that
usually
1. Offers a range
of deposit
accounts
2. Makes a loan
to individuals
and businesses
3. Safeguards
documents,
money, and
other item of
value
An investment
bank is a
Financial
institution that
usually
1.
2.
3.
Investment Bank






What is an I.P.O.?
Why would a company issue an I.P.O.?
What does an investment bank have to do with an I.P.O.?
What is underwriting stock?
How does a bank get money from being a part of this
I.P.O.?
What determines if an I.P.O. is successful or not?
Group Work

At your table look up information about a recent I.P.O. filing.
This will be first come first serve per company.



Determine what the company does to receive revenue
What investment bank was involved?
How many shares were issued and at what price?

What was the market value of the company then and now?




Use end of the day numbers
Market value=share price*#of shares outstanding
Was this a successful I.P.O.?
How many times can a company have an I.P.O.?
1 minute presentation

Commercial banks are primarily concerned
with an individual’s wealth

Investment banks handle the wealth of
companies, organizations, extremely wealthy
individuals, and even governments
Investment Bank


The line between what was an investment bank
and a commercial bank is blurred
Banks in general are taking a broader approach
to the services they offer
Investment Bank


Download- Graphic Organizer: Cause and
Effect
Presentation
Evolution of the
Investment Bank

What type of economic effects (both positive
and negative) has the investment industry had
on the economy?
The Influence of Investment
Banking on Society

What type of social effects (both positive and
negative) has the investment industry had on
society?
The Influence of Investment
Banking on Society





Characteristics of an investment bank
Services of an investment bank
Capital raising methods
Underwriting
Bulge bracket to boutique
Investment Banking

You will have the next 15 minutes to create one
or two short-answer questions based on the list
of key ideas provided
Investment Banking

Quiz: Overview of Investment Banking
Overview of Investment
Banking

Think about your project topic and of the
different ways they will be communicating
information about the topic to the audience at
the financial literacy fair



display board
brochure,
talking about the topic with visitors to their
booth
Culminating Project Work:
Investment Banking



What have you learned in this lesson that can
help you improve your culminating project
products?
Identify and describe three ways in which the
information you’ve learned in this lesson could
improve your culminating project products.
List the places you’d like to make the edits.
That is, identify which product or products
should include the new information
Culminating Project Work:
Investment Banking



Based upon your learning from the lesson,
respond to the prompt written below.
Work in groups of four to share their
predictions with one another.
Choose one prediction that they think is the
most reasonable to share with the rest of the
class.

In the next 10–20 years, the investment banking
industry will be characterized by…
Enrichment



With the current turmoil surrounding the
financial services industry, synthesize your
knowledge of investment banks and create
classic “wanted-style” posters based on the
types of ethical standards that you would like
investment banks to adopt.
Use a standard 8.5 x 11 paper and write
“WANTED INVESTMENT BANK” at the top
Underneath the heading, create three ethical
standards and/or regulations that you would
like investment banks to abide by
Enrichment


Read the article “Wall street investment banks
have a way of snookering commercial rivals”
(http://www.telegraph.co.uk/finance/breakingv
iewscom/4324677/Wall-Street-investmentbanks-have-a-way-of-snookering-commercialrivals.html).
Investigate various examples of commercial
banks acquiring investment banks.
Enrichment


Watch the short video clip found at
http://www.labnol.org/internet/credit-crisisexplained-in-simple-english/7431/
Research how investment banks have
contributed to the financial crisis of today and
share your findings with the class
Enrichment

Have students write a personal essay in
response to the following quote (found
online at
http://moneyover55.about.com/od/howt
oinvest/a/bernsteinquotes.htm):

“The Glass-Steagall Act separated commercial
and investment banking. This last statute has
recently been repealed. Sooner or later, we will
likely painfully relearn the reasons for its
passage almost seven decades ago.”
Enrichment

Research various investments banks and other
financial institutions that offer investment
banking services. Have students choose an
institution to write about and prepare a short
essay that describes the history, the services
provided, the main products offered, and the
current financial situation.
Enrichment

Information Technology: Every year global
leaders attend the World Economic Forum in
Switzerland. During the 2009 meeting, the
Davos Debates were launched and included
responses from individuals around the world.
In light of some of the major events that have
shaped the investment banking industry, have
students create their own podcasts or videos
that respond to the 2009 Davos Debate
question: “Should company executives have a
code of ethics similar to doctors and lawyers?”
Cross-Curricular
Integration