The Lemonade Times Vol. 22

✅ "How Does a Company Actually Go Public?" — The step-by-step IPO journey, plus why investors LOVE money-losing companies

✅ "The History of the Fed" — How the Federal Reserve was born (it's a wild story!)

✅ "The Weight-Loss Wonder Maker" — Inside Eli Lilly, the most valuable drug company on Earth

✅ "Peace at Last!" — The U.S. and Iran finally reached a deal!

🍋 Hi, Lemonade Squad! It's Summer! 👋

This week we'll FINISH our IPO story by learning what happens behind the scenes when a company goes public. And we'll answer one of the WEIRDEST questions in investing: why do people give billions of dollars to companies that LOSE money?

Then in Econ 101, we'll travel back in time to learn the wild history of the Federal Reserve. And in Lemonade Picks, we're meeting Eli Lilly, the company behind the famous weight-loss drug Zepbound! 🍋

This was a week full of HUGE news. Let's break it down!

🕊️ The BIG News: Peace Deal!

On Sunday, June 15, the U.S. and Iran finally announced an initial peace deal! 🎉

Here's what was in it:

Oil prices DROPPED a lot. That was great news for inflation worries and for the stock market!

😬 The Fed Says "Maybe HIGHER, Not Lower!"

On Wednesday, June 17, Kevin Warsh held his FIRST big Fed meeting as chair. The Fed kept interest rates the same (between 3.50% and 3.75%). BUT here's the twist! Warsh and the Fed hinted that the NEXT change might be a rate INCREASE, not a decrease. That's called being "hawkish." 🦅 (Hawks like high rates. Doves prefer low rates. 🕊️)

Investors had been HOPING for rate cuts. So this surprised them!

🚀 SpaceX Cooled Off

After last week's huge IPO debut, SpaceX climbed for a few days. But then in the last two trading days, the stock pulled back. Still, SpaceX's market cap surpassed Tesla! That's HUGE because both companies are owned by Elon Musk.

📈 Friday's Strong Finish (June 18)

Despite the choppy week, stocks ended strong:

For the WEEK overall: S&P 500 +0.9%, Dow +0.7%, NASDAQ +2.4%. Peace deal optimism won out!

Last week, you learned that an IPO is a company's BIG day on the stock market. But what actually HAPPENS to make that day come true?

Step 1: Pick a Helper (Investment Bank) 🏦

The company picks an investment bank, like Goldman Sachs or JPMorgan. Think of it like getting a tour guide for Disney World. You COULD figure it out alone, but a guide makes everything way smoother!

Step 2: File the Big Papers (S-1) 📄

The company has to file a HUGE document called an S-1 with the SEC (Securities and Exchange Commission). The S-1 explains EVERYTHING about the company: how much money it makes, how much it spends, future plans, and all the risks. Sound boring? It protects regular people from buying into a scam!

Step 3: Go on Tour (Roadshow) 🎤

The company's leaders travel to meet with BIG investors (banks, mutual funds). They make presentations like: "Hi, we're SpaceX! Would you like to buy our stock?"

Step 4: Set the Price 💰

Based on how excited investors are, the bank sets the IPO price. For SpaceX, the IPO price was $135 per share. That made the company worth $1.77 trillion!

Step 5: Ring the Bell! 🔔

On IPO day, the CEO rings the OPENING BELL. The stock starts trading. The whole process usually takes 6 months to 1 year. 😮

SpaceX's AI division LOST $7 billion last quarter. So why did investors give them $75 BILLION??

1. Bet on the FUTURE, not Today 🔮

Smart investors think, "Sure, SpaceX is losing money NOW. But in 10 years? They might OWN space travel and earn billions!"

2. Growing FAST 📈

Amazon lost money for YEARS in the 1990s. Investors thought, "We don't care if they don't make profit yet. They're getting BIGGER!" And boom, today Amazon is worth $2 trillion. 🤯

3. Building Something Huge 🏗️

Some companies lose money because they're investing tons in factories or research. Tesla lost money for years while building factories. Now they're profitable AND huge.

4. Sometimes It's a Gamble 🎲

Honestly? Sometimes investors are GAMBLING. They hope a money-losing company will become the next Apple. Most lose money. But the rare WINNERS make HUGE returns!

Buying money-losing companies is RISKY:

Smart investors ask: Is the company GROWING fast? Does it have something special? Are the leaders smart? How long until they can make a profit?

We've talked about the Federal Reserve A LOT. But where did the Fed COME FROM? Get ready, because this is one of the wildest stories in American history!

For MOST of America's history, there was NO Federal Reserve. Americans REALLY didn't trust banks! Some early leaders (like Thomas Jefferson) thought a central bank would be too powerful and help rich people at the expense of regular folks.

What happened without a central bank? Chaos! 😱 Bank panics every few years. Banks went bankrupt. Stock market crashes. Lots of families lost their savings.

America had bank panics in 1819, 1837, 1857, 1873, 1893, and 1907. Almost every 10-20 years!

The Panic of 1907 was the WORST. People rushed to banks to take their money out. Banks ran out of cash! Some banks closed forever.

The country was rescued by ONE person: a super-rich banker named J.P. Morgan. He literally locked the biggest bankers in his library and didn't let them leave until they agreed to LOAN their own money to save the system! 🤝

But Americans realized: "Wait, we can't just rely on ONE rich guy every time!"

Congress created the Federal Reserve System in 1913. President Woodrow Wilson signed it into law on December 23, 1913.

The Fed was special. Instead of being just ONE bank, it was a network of 12 regional banks across the country. The idea: "Spread out the power so no one place is too strong."

The Fed had 3 main jobs:

Just 16 years later, the Fed had its first MAJOR test... and it FAILED big time! 😬

In 1929, the stock market crashed. Banks started to fail. The Fed had the power to help, but didn't know what to do. So they basically did NOTHING.

Result? The Great Depression. About 9,000 banks failed. Unemployment hit 25%. It was the worst economic disaster in American history.

After this, the Fed became MUCH more powerful. And it learned: when things get scary, ACT FAST.

The Fed has become a SUPERHERO during crises:

Both times, the Fed prevented another Great Depression!

Now Kevin Warsh runs the Fed. His job is the same as it's been for 110 years: keep prices stable, keep unemployment low, prevent financial disasters.

This week's pick is one of the most amazing American companies. Meet Eli Lilly!

Ticker: LLY | Traded on: NYSE | Market Cap: Over $1.03 Trillion

Eli Lilly was founded in 1876 in Indianapolis by a real person named Colonel Eli Lilly. He was a pharmacist AND a Civil War veteran! He had a strong sense of duty and honor.

When he started his company, he promised three things:

Sounds simple today. But back in 1876, there were LOTS of fake medicines being sold. People would sell colored water and claim it was magic medicine! Colonel Lilly was a pioneer of HONEST medicine. His simple promise made his company famous.

Over 150 years, Eli Lilly has made medicines that helped MILLIONS:

Lilly was actually the FIRST company in the world to mass-produce insulin back in the 1920s. Before that, diabetes was basically a death sentence. Lilly changed that! 🦸

Everyone is talking about Lilly because of their drugs Mounjaro and Zepbound. These are GLP-1 drugs. They help your body feel full and reduce hunger.

Here's how huge this has become:

That's why Eli Lilly's stock has SOARED. The company is now worth over $700 BILLION!

Lilly's biggest competitor is a Danish company called Novo Nordisk, which makes Ozempic and Wegovy. So far, Lilly is winning! They have nearly 58% of the U.S. market.

Why Investors LOVE Lilly: Mounjaro and Zepbound are growing fast. They have OTHER promising drugs. They've been around for 150 years (super stable!). People always need medicine.

Why Some Investors Are Worried: The stock has gone up A LOT, so the price is high. New competitors might come along. Some patients can't afford the drugs.

Q1: What's the FIRST step a company takes when it wants to go public?

Q2: Why do investors sometimes buy stocks of money-losing companies?

Q3: When was the Federal Reserve created?

Q4: What are Mounjaro and Zepbound used to treat?

Q5: Why did markets like the U.S.-Iran peace deal news?

"Summer, last week you said SpaceX raised $75 BILLION dollars in their IPO. But where did all that money actually GO? Did they put it in a giant piggy bank?" — Lucas, age 9, California

Lucas, GREAT question! And one that even a lot of grown-ups don't think about. 💡 The short answer: NO, the $75 billion did NOT go in a giant piggy bank! It went to work IMMEDIATELY!

Here's what happens after a company gets all that IPO cash:

1. Some Goes to Existing Owners 👨‍💼 — Some of the $75 billion went to people who bought SpaceX stock YEARS ago. They finally got to cash out!

2. Some Goes to Build Stuff 🏗️ — More rockets, MORE Starlink satellites, AI computer systems, Starship development.

3. Some Goes to "Just in Case" 🛡️ — Smart companies always keep extra cash for emergencies.

4. Almost ZERO Goes to Random Stuff 🚫 — Companies aren't allowed to use IPO money for silly things. They have to use it for what they promised in the S-1 document. If not, investors can SUE them!

So when you see a company raise BILLIONS, most goes to making the company bigger and better! It's like getting a $100 birthday gift. You can spend it on cool stuff, save some, and maybe share a little with family. Companies are the same way, just with WAY more zeros! 💰

Mission 1 — IPO Step-by-Step 📋 Pretend YOU'RE the CEO of a lemonade business going to IPO. Draw all 5 steps! Show it to a parent!

Mission 2 — Fed Time Travel 🕰️ Ask a parent or grandparent: "Do you remember the 2008 financial crisis? Or the COVID economy?" Listen to their story. The Fed helped fix both!

Mission 3 — Drug Discovery 💊 Look in your medicine cabinet (with a parent!). Are any of your family's medicines made by Eli Lilly?

Summer's Reflection: This week we learned the BEHIND THE SCENES of how a company goes public. We discovered the wild history of the Federal Reserve. And we met Eli Lilly, a company that's been making medicines for 150 years and JUST hit gold with weight-loss drugs!

The big lesson? Whether you're an IPO, the Fed learning from past mistakes, or a 150-year-old drug company finding new success... growth comes from learning, adapting, and taking smart risks. That's true for companies, and it's true for kids like YOU!

Keep growing, Lemonade Squad! See you next week! 🍋