How much do IPOs pay in accounting and legal fees?
According to our analysis, the average amount of accounting and legal fees paid by initial public offerings in 2019 totaled roughly $2.2 million – with accounting fees averaging just under $0.8 million and legal fees averaging around $1.4 million.
An initial public offering, more commonly referred to as an IPO, is the process of offering shares of a private corporation to the public in a new stock issuance, therefore becoming a public company. This process – which requires many professionals, including underwriters, outside counsel, and accounting firms – can be lengthy and the costs can be substantial.
There were over 500 IPOs between 2018 and 2019. Some of the big names during this time include Spotify [SPOT], Uber [UBER], Lyft [LYFT], Pinterest [PINS], and Peloton [PTON].
Accounting fees, on average, increased from 2017 to 2018, jumping 23% to $1.03 million. Legal fees also increased, averaging $1.48 million in 2018 – an increase of 5.5% since 2017.
In 2019, however, average accounting fees declined by 23.4%, dropping to $0.79 million while average legal fees declined by 3.5% to $1.43 million.
Between 2017 and 2018, the slight increase in fees was, in part, due to higher than normal accounting fees reported by one company – Equitable Holdings, Inc [EQH]. Their $50 million in accounting fees is almost 48 times the 2018 average – the highest since 2013 when Empire State Realty Trust, Inc. [ESRT] reported accounting fees of $47.3 billion.
Multiple factors can contribute to the amount an IPO pays in accounting fees, including size, industry, and accounting complexity. Equitable Holdings, an established insurance company with approximately $3.3 billion in revenue, would expect to pay more for accounting services than your average IPO.
The total amount of accounting and legal fees as a percentage of total IPO proceeds has steadily declined over the last few years, dropping from 1.42% in 2016 to 0.81% in 2019.
Did you know? Audit Analytics tracks the IPO market and provides quarterly updates on IPO activity.
For more information on this analysis or our IPO database, please contact us.