The Costs of Going Public

There are three costs associated with an initial public offering. First, the firm must consider the legal and administrative cost of making a new issue, including the cost of preparing registration statements and filing fees. Second, the firm should examine the underwriting commission — the gross spread between the offering price and what the firm receives per share, which goes to cover the underwriting, management, and selling fees on the issue. This commission can be substantial and decreases as the size of the issue increases. Figure 7.6 summarizes the average issuance and underwriting costs for issues of different sizes, reported by Ritter (1998).

Figure7.6: Issuance Costs by Size of Issue

Figure7.6: Issuance Costs by Size of Issue

□ Underwriting Commission

□ Issuance Expenses

<1.99 2.00 -4.99 5.00 - 9.99 10.00 - 20.00 - 50.00 - 100.00 -

Retirement Planning For The Golden Years

Retirement Planning For The Golden Years

If mutual funds seem boring to you, there are other higher risk investment opportunities in the form of stocks. I seriously recommend studying the market carefully and completely before making the leap into stock trading but this can be quite the short-term quick profit rush that you are looking for if you am willing to risk your retirement investment for the sake of increasing your net worth. If you do choose to invest in the stock market please take the time to learn the proper procedures, the risks, and the process before diving in. If you have a financial planner and you definitely should then he or she may prove to be an exceptional resource when it comes to the practice of 'playing' the stock market.

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