Wall Street is currently experiencing the highest non-underwriting costs of flotation in the past five years, as revealed by an analysis conducted by the Financial Times (FT). Non-underwriting costs refer to the expenses incurred by a company when going public, excluding the fees charged by underwriters. These costs are essential to cover services such as legal advice, accounting, and marketing.
The analysis conducted by FT indicates that the expenses associated with bringing companies to market have risen significantly over the past few years. Various factors contribute to these escalating costs, including the surge in global share offerings and an increase in the demand for specialist advice. The average non-underwriting cost of flotation in 2021 is estimated to be around $3 million, a 45% increase compared to the average cost in 2016.
This rise in non-underwriting costs of flotation has implications for both companies seeking to go public and investors. Companies considering an initial public offering (IPO) must now budget for higher expenses, which can impact their overall valuation and financial planning. Additionally, investors may need to assess these costs when evaluating the potential return on investment in IPOs. As the trend of market offerings continues to grow, it is crucial for businesses and investors to adapt to these changing financial dynamics.
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