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Although it has significant advantages for the Company, the IPO process will involve costs that must be considered.
The total direct cost of the operation varies greatly depending on the size of the fundraising, the market capitalisation of the Company, the context, and the choice of advisors.
The direct costs comprise the fees due to the various advisors, including the Placement Financial Intermediary(ies), the Stock Market Operator and the Regulator, as well as marketing costs (road shows, media publications, etc.).
Furthermore, indirect costs, such as internal structuring and management time dedicated to the IPO process should not be underestimated.
Based on financial information available from Portuguese listed companies, the average total cost of an IPO tends to be within the range of 3% – 7% of the total amount of funds raised.
Typically, the larger the offering, the higher the costs in absolute terms. Nevertheless, in relative terms, usually they represent a much smaller proportion of the value of the offer proceeds compared with small-sized offerings.
The main direct costs of IPO process (not considering here the marketing costs) are as follows:
The financial advisory and placement fees are one of the largest fees of an IPO and are negotiated case by case between the parties. The commissions charged depend on the offering size, the type of securities being offered, the nature of the placement/underwriting commitment (if any), the Company’s business nature and state of development and the current market condition. Often this commission involves a fixed fee as well as a success fee dependent on the amount raised.
Legal advisory fees
Legal fees are costs incurred for the provision of assisting services to the Company in any required internal restructuring, conducting the legal due diligence, preparing/reviewing of all legal documents required for the IPO, including the Prospectus or Information Document, drafting and reviewing of contracts, such as the underwriting agreement (if applicable). Once more, the fees will vary depending on the complexity of the Public Offering, the Company structure, level of restructuring required and documentation necessary.
Auditing and accounting fees
Auditing and accounting fees are incurred for the audit service of the Company’s financial statements required to be included in the Prospectus, the auditors’ review of the related documents, and comfort letters to support underwriters. The costs will vary depending on the additional information required to be audited, the nature of the existing accounting issues and whether financial forecasts and pro forma financial statements will be needed.
Advertising / PR fees
The Company may also hire a PR/IR adviser with experience in guaranteeing appropriate communication with the media and retail investors, who charges fees that may vary depending on the types of investors the Company is looking to attract. These fees may relate to publication and announcements needed for compliance with legal obligations, but can also include a strong advertising campaign across different press and media channels, to attract the largest possible number of potential investors.
The CMVM charges fees for the appraisal of the documentation subject to its approval:
The fixed fees referred above shall be paid upon request for appraisal of the documentation.
The Company that applies for admission to trading of its shares shall be charged fees by the Stock Market Operator according to the conditions of the exchange.
Admission fees (Euronext)
Euronext charges the following initial admission fees for shares:
Check more detailed fees charged by Euronext here.
Registration fee (Euronext Securities Porto)
The fees charged for each registration of securities in the centralized securities system, for each issue or series of securities are:
Check more detailed fees charged by Interbolsa here.
