2020 IPO Accounting and Legal Fees

There were 474 initial public offerings in 2020 – the highest amount of IPOs in a single year since 2000. Interestingly, as noted in our previous analyses, 2020’s IPO activity was primarily driven by blank checks and special purpose acquisition companies (SPACs).

While we often talk about the proceeds of initial public offerings, here, we look at the accounting and legal fees paid by IPOs.

The average amount of accounting and legal fees paid by IPOs continued to decline in 2020, totaling roughly $1.70 million – with accounting fees averaging roughly $0.59 million and legal fees averaging around $1.11 million.

Compared to 2019, the average accounting fees declined by 25.2% in 2020, dropping to $0.59 million, while average legal fees also decreased 22.1% to $1.11 million. A portion of the decrease in accounting fees in 2020 can be attributed to the increase in SPAC IPOs, as accounting fees for SPACs are substantially lower than those for traditional initial public offerings.

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. Multiple factors can contribute to the amount an IPO pays in accounting fees, including size, industry, and accounting complexity. 

Some of the IPOs in 2020 with proceeds greater than $1 billion include Pershing Square Tontine Holdings, Ltd. [PSTH], Airbnb, Inc. [ABNB] and DoorDash Inc. [DASH].

As shown in the table above, 2020 IPOs MediaAlpha, Inc. [MAX], with accounting fees of $8.9 million, and DoorDash Inc [DASH], with accounting fees of $8.6 million, were among the top 10 accounting fees for IPOs since 2011. Worth noting, none of these ten initial public offerings were a SPAC.

The total amount of accounting and legal fees as a percentage of total IPO proceeds has also steadily declined over the last few years, dropping from 1.42% in 2016 to 0.52% in 2020.

This analysis uses data from the IPOs database, powered by Audit Analytics.

For more information about Audit Analytics or this analysis, please contact us.

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