What Will It Cost?

How much will an IPO cost your company? Out of pockets expenses can run as high as $2.5 million. Remember this money is spent regardless of the outcome of your public offering. If your underwriter cancels your deal or the marketplace does not want to buy your shares you are out the full amount. This amount also excludes underwriter’s fees. The average cost of an IPO including out of pocket expenses and underwriting fees runs about 20% to 25% of the total money raised. So if you are raising $40 million expect to pay $8 million to $10 million in total fees.

The losses can be substantial if you do not pass the finish line. These expenses primarily involve the costs of investment bankers, SEC legal work and accounting services provided by a PCAOB CPA firm along with various expenses for filing fees, blue sky fees, etc. Let’s take a closer look at these expenses.

Your first large expense will be to hire an in-house CFO. The salaries and benefits of CFO compensation have nearly doubled since the introduction of Sarbanes Oxley legislation in 2002. Why, you ask. It’s simple. The CFO and CEO are personally responsible and libel for signing off on and submitting all information that is sent to the SEC. In simple English, its their ass on the line. If something goes wrong they are the ones who will be blamed, fined and possible end in jail. You can expect to spend approximately $250K a year on a good CFO. This is usually paid through a combination of both cash and stock options.

You also must hire a PCAOB certified CPA firm to conduct an audit of the last two years of your company. A certified audit that produces so-called audited financial statements is costly. Depending on the size of your business, the cost of an annual audit will probably start at a low of about $100,000 to a high of $750,000 depending upon the complexity of the audit.

You will have to find an experienced securities attorney. The cost of such an attorney for an IPO filing starts at about $100,000 and can go upwards of over a $1,000,000 depending upon the amount of “comments” you receive from the SEC.

Are you starting to get a real sick feeling in your stomach? Well, it’s not over yet.

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