For entrepreneurs who are investigating possible underwriters, the best measure of a firm's success is the average aftermarket performance of its IPOs. When analyzing that statistic, keep in mind that it's probably fairest to focus on a stock's performance during the first 12 months after its IPO. That's because even the best underwriters can't prop up a sluggish stock indefinitely. After a while, the only thing that will move the price upward is good corporate results.
In the end, that's why Mark Woodward is now happy about Serena Software's IPO. The company has delivered on everything it promised. It has continued to grow, and it's been consistently profitable. As a result, a top firm has now assigned an analyst to follow Serena, and two other firms are getting ready to do the same.
Happy endings do happen. But for entrepreneurs who want to improve their odds, it's best to remember that IPOs have a lot in common with high school proms. A lot depends on who takes you there. And sometimes it's better to stay home.
Jill Andresky Fraser is Inc's finance editor. Emily Barker is a senior staff writer.
Biggest Little Underwriters
Firms that have the most experience in taking small companies public
Lead
Underwriter |
# of IPOs Below
$40 Million
(1999-2001) |
Total #
of Issues
(1999 - 2001) |
Total Proceeds Raised,
in Millions
(1999 - 2001) |
Average
Aftermarket
Performance* |
| Credit Suisse First Boston |
22 |
180 |
$24,291 |
23.62% |
| JP Morgan |
13 |
68 |
$4,916 |
8.58% |
| Deutsche Bank AG |
10 |
61 |
$4,665 |
15.36% |
| Lehman Brothers |
8 |
60 |
$5,785 |
7.04% |
| Merrill Lynch & Co. |
8 |
75 |
$12,940 |
4.74% |
| Paulson Investment Co. |
7 |
8 |
$191 |
-30.52% |
| FleetBoston Financial Corp. |
6 |
76 |
$5,488 |
27.35% |
| CIBC World Markets |
5 |
19 |
$1,473 |
10.60% |
*As of March 31, 2002, for all IPOs conducted during the previous 12 months.
Source: Thomson Financial, New York City.
The Price of Going Public
Expenses can vary widely, but these are typical.
| Underwriting fee (negotiable, but doesn't vary much in practice) |
7% of offering |
| SEC filing fee |
$92 for each $1 million raised |
| Nasdaq initial listing fee (depending on the number of shares outstanding) |
$105,000 to $155,000 |
| National Association of Securities Dealers filing fee |
$0.0001 x the number of shares, plus $500 |
| Legal fees |
$300,000 to $500,000 |
| Accounting fees |
$300,000 to $500,000 |
| Printing expenses (for the prospectus, which sometimes must be printed and circulated several times) |
$200,000 to $300,000 |
| Transfer-agent fees (to an outside firm for keeping track of shareholders and transferring stock certificates) |
$10,000 to $20,000 |
| Blue-sky fees (if there are no state registration fees) |
$5,000 |
| Miscellaneous (for the road show and other expenses) |
$100,000 |
| Directors' and officers' insurance |
$500,000 to $1 million |
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Related links:
Making the Most of the IPO Road Show
