Going public through an Initial Public Offering (IPO) is a transformative milestone that offers companies access to capital markets, increased visibility, and new growth opportunities. One of the first questions I often receive from prospective clients is, “How much will it cost?”

A typical Nasdaq Capital Market IPO targets a market cap of USD 15-50 million upon listing, with companies often raising between USD 5-15 million. The associated costs can range from USD 1.5 to 2.5 million, but the actual amount varies based on factors such as the company’s size at listing (which influences the funds raised and underwriting fees), the complexity of the business, and the extent of legal and financial preparation required.

Understanding these expenses upfront is crucial for effective planning and a smooth IPO process. In this guide, we’ll explore the key costs associated with going public and offer insights to help you navigate the journey with confidence.

An IPO involves a range of essential expenses, each contributing to a smooth and successful journey to the public market. Here’s a breakdown of the primary costs:

1. Key Costs Associated with an IPO

1. IPO Adviser
   • Fee Range: USD 150,000 – 600,000
   • A trusted IPO adviser coordinates the entire process, provides strategic guidance, and sources professional teams. The fees depend on the level of involvement, scope of services, and complexity of the IPO.
2. Legal Counsel
   • Fee Range: USD 300,000 – 600,000
   • Legal counsel handles regulatory filings, prospectus creation, and compliance with U.S. securities laws. The cost varies based on the complexity of the company’s legal structure and the extent of required due diligence.
3. Auditors
   • Fee Range: USD 300,000 – 600,000
   • Auditors prepare and verify financial statements in accordance with U.S. GAAP or IFRS. Fees depend on the size of the company, the complexity of its financials, and the thoroughness of the audit.
4. Industry Consultants (If needed)
   • Fee Range: USD 30,000 – 150,000
   • Specialized consultants may be needed to validate industry-specific insights and competitive advantages. Costs depend on the scope of the analysis and the consultant’s expertise.
5. Underwriter(s)
   • Fee Range: 6-8% of Funds Raised (payable upon listing)
   • Underwriters play a key role in pricing, marketing, and distributing shares. Their fees are usually 6-8% of the funds raised and are payable upon the successful completion of the IPO.
   • Additionally, the company is responsible for paying the underwriter’s legal counsel separately. The estimated cost for the underwriter’s legal counsel ranges from USD 150,000 – 300,000, depending on the complexity and due diligence requirements of the IPO.
6. Registration and Listing Fees
   • Fee Range: USD 75,000 – 150,000
   • These costs include SEC filing fees ($0.00013 per dollar of the aggregate offering amount – i.e. for every $1 million raised, the filing fee would be $130), Nasdaq listing fees (USD 50,000 – 75,000), and the DTC Eligibility Application Fee (USD 10,000 to 20,000). The exact amount depends on the company’s market cap, the number of shares to be listed, and specific listing requirements. DTC eligibility is critical for enabling electronic trading and efficient share settlement.
7. Marketing and Roadshow Costs (If needed)
   • Fee Range: USD 100,000 – 300,000
   • Costs cover travel, investor presentations, and marketing materials for the roadshow. The expenses vary based on the duration and scope of the roadshow, as well as the number of events held.
8. Investor Relations (Post-IPO if needed)
   • Fee Range: USD 50,000 – 150,000 per year
   • Setting up an investor relations team is crucial for ongoing communication with shareholders. This fee range covers the initial setup and annual costs for maintaining investor relations activities.
9. Long-Term Post-IPO Costs
   • Going public is just the beginning of your journey as a public company. It also brings ongoing responsibilities and additional costs that require careful planning:
     • OngoGoing public is only the beginning. It brings ongoing responsibilities and additional costs that require strategic planning:
     • Ongoing Compliance and Reporting: U.S. domestic companies must file quarterly reports (Form 10-Q), annual reports (Form 10-K), and disclose material events via Form 8-K. Foreign private issuers (FPIs) typically file an annual report (Form 20-F) and may use Form 6-K for interim updates. These filings require substantial resources, including accounting, legal, and compliance support, to ensure regulatory compliance.
     • Annual Listing Fees: Companies must pay annual fees to maintain their Nasdaq Capital Market listing, typically ranging from USD 40,000 to 50,000, depending on the number of shares listed.
     • Supplemental Listing Fees: If additional shares are issued after the IPO, Nasdaq may charge supplemental fees based on the new share count.

2. Strategic Planning for IPO Costs

Effective IPO cost management starts with careful budgeting and expert guidance:

• Budget Wisely: Work closely with advisers to plan for both initial IPO costs and ongoing compliance expenses. A detailed financial plan helps you anticipate and allocate resources efficiently.
• Leverage Expert Support: Experienced IPO advisers, like Lumina Consulting, provide end-to-end oversight, minimizing delays and sourcing the best professional teams for a smooth and successful IPO process.

Conclusion

Going public on the Nasdaq Capital Market opens up exciting growth opportunities for your business, but understanding the full scope of costs involved is critical for success. With careful budgeting, strategic planning, and the support of a skilled advisory team, your company can confidently navigate the complexities of the IPO process and make a smooth transition to the public market. If you’re considering an IPO, we invite you to schedule a free 30-minute Readiness Assessment call with us to evaluate your company’s stage and outline the next steps.