Comparison of IPO Realization Costs on Selected Security Markets

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JEL classification

• Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
• General Equilibrium and Disequilibrium: Financial Markets
• International Finance Forecasting and Simulation: Models and Applications

Keywords

Cost of IPO, Czech capital market, financing, IPO, world security market

Abstract

Funding development of the company through the “Initial Public Offering” has a high representation globally and belongs to traditional methods of raising funds necessary for development of business in the developed capital markets. Also in the Central and Eastern European countries, including the Czech Republic, there can be found growing interest in this form of company financing. The objective of the article is to analyze the amount of costs related to an IPO launch on the main world security markets, and compare the same to the costs of IPO‘s launched on the Prague Stock Exchange during its modern history. To attain the objectives, research based on the collection of secondary and primary data was carried out. The results obtained show that the direct IPO costs are reaching the minimum value on the market Euronext, the maximum on the market HKSE. Results showed that the direct IPO costs on the Czech capital market range between 5.6% and 9.0% of the value of issue. The biggest cost element are underwriting fees, generating usually more than half of all direct IPO costs. The rest of direct IPO costs include fees due to professional advisors for audits, legal and other advisory services, costs of marketing and issuer’s internal costs.