This article is from the Investing Articles: Public Offerings: IPO and DPO series.
Estimated Costs.
The offerings with the least initial
up-front costs are the offerings that allow an issuer to "test the
waters" by soliciting public indications of interest prior to
incurring the major expense of preparing an extensive disclosure
document and, in some cases, registering the security under state
law.>
The estimated costs of a Regulation A Offering may be summarized as follows:
(2) Legal due diligence fees, preparation of selling agreement with the underwriter, and preparation of the "test the waters" document ( if requested ) - $10,000-$15,000, of which $7,500 is a deposit and the balance is subsequently billed.
(3) Preparation of a offering statement and/or registration of the securities in one or more states - $15,000-$25,000 (or more depending on how much work the issuer puts into preparing the documents and how well the issuer works with the attorney).
(4) Travel expenses and other out-of-pocket expenses.
(6) The SEC filing fee is $500. The Blue Sky filing fees vary from state to state, but could approximate $10,000 if an offering is registered in 10-15 states, depending on the states. The NASD filing fee is $500 plus .01% of the offering amount.
(7) If the issuer has separate securities counsel, then such attorneys fees are additional expenses. Accounting fees are additional expenses.
Assumptions.
This summary is based upon the following
assumptions: the company is "clean", meaning the articles of
incorporation, the bylaws, and the material contracts do not need to
be revised or amended; the officers do not have securities laws
violations, bankruptcies, or other issues in their past; there is a
simple capital structure without multiple layers of securities and
debt; the company's officers are available and cooperative and do much
of the work, particularly in drafting the disclosure documents; the
company's officers and shareholders are decisive and take advice and
follow instructions readily and precisely; the company does not
present abnormal business risks (for example, a start up is obviously
more risky than a company with several years of profitable business,
and a start up with significant prior investment and a completed or
near completed product is less risky than a start-up that is a concept
only); the shareholders are realistic about the valuation of their
company. These estimates are based upon the estimated number of hours
multiplied by the hourly rate. If the number of hours is fewer than
estimated, then the costs will be less than estimated; if the number
of hours is more than estimated, then the cost will be greater than
estimated.
In addition, the issuer might have the costs of its own attorney's fees. Accordingly, an issuer may wish to consider jointly retaining the attorney with the underwriter and executing an appropriate waiver of conflict of interest. In such cases, the attorney would take on additional responsibilities normally undertaken by the issuers counsel, which would involve some unknown amount of fees. Typically, however, the issuer may expect that the amount of attorneys fees would be significantly reduced by retaining one attorney to conduct the offering.
 
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