lotus

previous page: IPO: Types of Offerings and Estimates of Costs
  
page up: Investing Articles: Public Offerings: IPO and DPO
  
next page: Direct Public Offering -- A Viable Financing Option For SmallBusinesses

IPO: Estimates of Costs And Expenses




Description

This article is from the Investing Articles: Public Offerings: IPO and DPO series.

IPO: Estimates of Costs And Expenses

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.

 

Continue to:













TOP
previous page: IPO: Types of Offerings and Estimates of Costs
  
page up: Investing Articles: Public Offerings: IPO and DPO
  
next page: Direct Public Offering -- A Viable Financing Option For SmallBusinesses