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Introduction
Although it has undeniable 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. It comprises the fees due to the various advisors, the financial intermediaries in charge of the placement of the shares being offered, the Regulator and Euronext, as well as marketing costs (road shows, media publications, etc.).
Furthermore, indirect costs (internal structuring, management time dedicated to the IPO process) should not be underestimated, as the preparation of the Company for its IPO will involve a lot of management effort.
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 costs of IPO process
***1 – Financial advisory / Investment bank fees***
The financial advisor’s commission (which may include advisory, placement, underwriting or stabilization fees) is one of the largest fees of an IPO and is negotiated case by case between the parties. The commissions charged depend on the offering size, the type of securities being sold, 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.
***2 – Advisory Fees***
Legal advisory fees
Legal fees are incurred for assisting 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. Usually, fees are due to the Issuer and/or selling shareholders’ counsel and also to the underwriters’ counsel. Once more, the fees will vary depending on the complexity of the Public Offering, the Company structure, level of restructuring required and comments from the regulatory authorities.
Auditing and accounting fees
Auditing and accounting fees are incurred for audits 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 need to be included.
Advertising / PR fees
The Company generally hires 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 (road show).
***3 – CMVM Fees***
The CMVM charges fees for the appraisal of the documentation prepared for the purposes of approval of :
► Prospectus in the form of a single document: €10,000, increased by 0.15‰ of the value of the issue and/or sale made, with the collection not exceeding €100,000.
► Prospectuses in the form of separate documents:
i) €5,000 for the registration document for equity securities and
ii) €1,500 for the securities note, for equity securities increased by 0.1‰ of the value of the issue, with the collection not exceeding €50,000.
► Addendum to the prospectus, in the value of €1 500;
► Publicity for advertising campaigns with up to 4 pieces, in the amount of €1,000, to which an additional €150 is added for each piece and or renewal of the request for approval.
The fixed fees referred above shall be paid upon request for appraisal of the documentation and shall not be refunded, even if the applicant company subsequently cancels the request made.
***4 – Euronext Fees***
The Issuer that applies for admission to trading of its shares shall promptly pay any fees charged by Euronext according to the conditions established and communicated to the Issuers.
Listing and admission fees
The stock exchange, Euronext, charges the following initial admission fees for equity securities:
| Access | ► A fixed fee of €5,000 ► A variable fee of 0.125% per € of Market capitalisation ► Maximum fee: €300k |
| Regulated and Growth | ► A fixed fee of €12k ► Following variable fees for each tranche of market capitalisation: [0 – 50]€m – 0.060% [50 – 100]€m – 0.055% [100 – 200]€m – 0.050% [200 – 500]€m – 0.040% [500 – 1,000]€m – 0.030% [1,000 – 5,000]€m – 0.020% [5,000 and above]€m – 0.010% ► Maximum fee: €2.5m |
Centralisation fees
In the event that a Centralisation of Public Offerings for the distribution of equity securities is held, a service fee may be payable by the Issuer corresponding to 0.05% of the total amount centralized, with a minimum fee of €10,000.
To check more detailed fees charged by Euronext: https://www.euronext.com/en/raise-capital/how-go-public/rules-fees-and-forms.
Registration fee
The fees charged for each registration of securities in the centralized securities system, for each issue or series of securities are:
To check more detailed fees charged by Interbolsa: https://www.interbolsa.pt/informacao-e-documentacao/dados-da-atividade/lista-de-precos/.
