The following data is taken from "Going Public" by James B. Arkebauer (1994) and the IPO cost website at: http://www.intranet.ca/~tgil/p2.html
You should keep in mind that costs vary based upon the complexity, the size of the underwriting and the history of the private company. The following IPO costs would be reasonable for a company with over $2 million in gross revenues and a 3-5 year operating history. A startup company would pay less than half this estimate to do an IPO. In some cases one or both sources acknowledge a cost listed below, but fail to offer an estimate. In those cases, I've supplied an estimate based upon my IPO experience.
Pre-IPO Costs$300,000
Legal Costs$175,000
Accounting$80,000
Printing & Mailing$100,000
Translation$30,000
Market Prep Costs$90,000
Investment Bankers$50,000
Consultants$50,000
Moody's or S&P$6,000
Blue Sky Fees$20,000 (California only)
Transfer Agent$2,000
Mgnt & Admin$200,000
SEC Filing Fee$5,000
Taxes$15,000 (Estimated)
Total$1,123, 000
Underwriting Costs
The underwriting cost is a function of the money raised in the IPO. The NASD allow up to 18% in costs. If the gross revenue from the IPO is $10 million, this is an underwriting cost of $1.8 million.
Here's how the costs breakdown
Nonaccountable Expense 3%
Accountable Expense 5%
Discount 10%
Company supplied IPO buyers usually 50% (10%-90%)
Commission 5% - Its paid by the brokerage firm client and doesn't affect
the money received by the company.
Compare these costs with that of doing a spinoff. For a startup company seeking a million dollar financing the cost is $150,000. For an operating copy grossing over US$2 million, the cost is US$250,000.
If you want to arrange a spinoff or blind pool, contact me. We can arrange a fee consultation.
Five Myths About Inflation
A classic definition of inflation is any increase in the money supply. Understanding inflation is vital to anyone seeking investment profits or attempting to build a successful company. As with most basic issues of the global economy, inflation is surrounded by myths and misinformation.
Recession Planning
The clouds of a 2006 Recession are starting to form on America's horizon.Politicians know that Recessions or Depressions are bad for their reelectionchanges. Bad economic times tend to create unemployment among the nice folksholding office at the time of economic stress. You can expect the Governmentto do everything possible to delay a Recession until after the November 2006election. However, the American economy is currently caught in an upwardmoving inflation and a Recession would still the fires of a runawaycurrency. The Real Estate Bubble may be about to burst. And, America'sfinancial institutions appear to be in increasing trouble over failedderivative bets.
African Aid
Africa, like everywhere else in the world, has its fair share of honest, intelligent; hardworking people who want to see their families have a better standard of living. Unfortunately, most of these people are living below the poverty line. The reasons that Africa, with all of its natural resources, is an economic basket case are complex. They start with the 16th Century Africans' failure to adopt an effective immigration policy. The result was the European immigrants divided up the continent without regard to historic tribal boundaries. The modern result has been tribal wars waged with modern weapons from the Sudan to Rwanda.
