How Much Does an IPO Cost?
An IPO has three invoiced costs and one that never appears on an invoice. The underwriting discount is the largest and is size-dependent: around 6.5–7% on a $100 million deal, falling toward 3.5% or lower above $1 billion. Other one-time costs — legal, audit, printing, exchange, insurance — commonly exceed $1 million and can run to several million. Ongoing public-company costs typically add $1–2 million or more per year, permanently. The fourth cost is underpricing, and it is often the largest of all.
Key facts
| Cost | Typical scale |
|---|---|
| Underwriting discount | ~7% for small and mid-sized deals; ~3.5% or lower above $1bn |
| Other one-time costs | Over $1m for the large majority of issuers; often several million |
| Exchange fees | A one-time application and listing fee, then an annual fee; revised yearly |
| Ongoing incremental costs | Commonly $1–2m per year, more for larger companies |
| Underpricing | Not invoiced; frequently the largest economic cost |
The underwriting discount
The difference between what investors pay and what the company receives. It appears on the prospectus cover in a three-column table — price to public, underwriting discounts and commissions, proceeds before expenses — and is the single largest line in almost every deal.
Is the underwriting fee always 7%?
No. The clustering at 7% is real and well documented: congressional testimony supporting the Middle Market IPO Underwriting Cost Act noted that from 1992 to 2017 more than 80% of middle-market IPOs carried a gross spread of exactly seven percent, and that from 2001 to 2022, 95% of US IPOs raising between $30 million and $130 million did.
But 7% is a fact about a size band, not a universal fee. PwC's analysis puts underwriting fees at roughly 6.5–7% for a $100 million offering, declining to an average around 3.5% for deals of $1 billion or more. The largest offerings negotiate far below that: Saudi Aramco's 2019 offering is reported to have paid around 1%, and several multi-billion-dollar US technology IPOs have priced in the 2–3% range.
Treat 7% as the default expectation for a mid-sized deal and as a number to be negotiated on a large one. Anyone quoting it as the IPO fee is describing a segment.
| $100m offering | $1bn offering | |
|---|---|---|
| Gross proceeds | $100,000,000 | $1,000,000,000 |
| Spread | 7.0% | 3.5% |
| Underwriting discount | $7,000,000 | $35,000,000 |
| Proceeds before expenses | $93,000,000 | $965,000,000 |
The absolute fee rises with size; the percentage falls sharply.
What does the spread buy?
Distribution through the banks' institutional sales forces, the firm commitment to purchase the shares, the diligence work supporting the underwriters' Section 11 defence, stabilisation and the over-allotment mechanism after listing, and subsequent research coverage from the syndicate. See IPO underwriters.
What are the other one-time costs?
These are disclosed in the registration statement under Item 511 of Regulation S-K, in a table of expenses of issuance and distribution — the company's own estimate of what everything except underwriting will cost, and one of the more useful and least-read parts of an S-1.
Legal fees. Issuer's counsel and, typically, underwriters' counsel. Usually the largest non-underwriting line, and a materially higher share of total costs on smaller deals than on larger ones.
Accounting and audit. Audits of the required periods, comfort letters to the underwriters, and any restatement or reaudit work triggered by diligence.
SEC registration fee. Calculated on the aggregate offering amount at a rate the SEC resets each fiscal year. Small relative to everything else here.
FINRA filing fee. Payable for FINRA's review of underwriting terms under Rule 5110.
Financial printer. Typesetting, EDGAR conversion and distribution of the prospectus. Cheaper than in the paper era, not free.
D&O insurance. Consistently the most volatile and most underestimated line. Public-company directors' and officers' liability coverage is priced against securities-litigation exposure, and newly public companies are a heavily litigated class.
Transfer agent, registrar and roadshow costs.
PwC survey work has found the large majority of IPO CFOs spent more than $1 million on one-time costs outside the underwriting discount, with a meaningful share reporting that costs exceeded expectations significantly.
What do the exchanges charge?
Both NYSE and Nasdaq charge a one-time fee to list — an application fee plus an initial listing fee — and then an annual fee scaled by shares outstanding, subject to a floor and, on the NYSE, a cap. Nasdaq bundles most ongoing regulatory charges into a single all-inclusive annual fee.
Fee schedules are revised on an annual cycle, typically effective 1 January, so the current figures belong in the source rather than here: check the NYSE Listed Company Manual and the Nasdaq Listing Center fee schedule for the year in question.
Relative to the underwriting discount, listing fees are a rounding error. They matter for a small issuer and are noise for a large one.
What does it cost to stay public?
These are permanent, and they are what first-time issuers most often underestimate.
| Category | What it covers |
|---|---|
| Audit and financial reporting | Larger audit scope, quarterly reviews, technical accounting support |
| Internal controls | Documentation, testing, and eventually auditor attestation |
| Additional headcount | SEC reporting, technical accounting, internal audit, expanded legal |
| Board costs | Independent director retainers, committee chair premiums, equity grants |
| D&O insurance | Renewed annually, priced against litigation exposure |
| Investor relations | Function, systems, earnings calls, conferences |
| Exchange and filing fees | Annual listing fees, agent fees |
| Systems | Reporting, close and compliance tooling |
PwC has found newly public companies commonly incurring $1–1.9 million annually in incremental recurring costs, and larger or more complex companies running considerably higher, particularly on board compensation and insurance.
Emerging growth companies and smaller reporting companies receive phased-in relief on some requirements, which defers rather than removes the cost. See emerging growth company.
The cost nobody invoices: underpricing
If a company sells shares at $33 and the market closes its first day at $115.50, the difference on every share sold is value that went to allocated buyers rather than to the company and its selling shareholders. Figma's July 2025 IPO is the vivid recent example.
The measure is money left on the table: (first-day close − offer price) × shares sold at the offer price, excluding over-allotment shares. It uses the offer-to-close first-day return on traditional operating-company IPOs; see methodology.
Two caveats. This is a descriptive figure, not proof the deal could have priced at the closing level — pricing higher changes the demand that produced the close. And a first-day pop is not unambiguously bad for an issuer; there are arguments that it buys goodwill with investors who will participate in later offerings. But it dwarfs the underwriting spread in many deals, and an honest accounting of IPO cost has to include it. See why do IPOs pop?
Putting it together
For a hypothetical $300 million offering, all primary:
| Line | Amount |
|---|---|
| Gross proceeds | $300,000,000 |
| Underwriting discount at 6.0% | ($18,000,000) |
| Other offering expenses | ($5,500,000) |
| Net proceeds to company | $276,500,000 |
| Memo: first-day pop of 25% | ~$75,000,000 of value to allocated buyers |
| Memo: incremental annual public-company cost | ~$2,000,000 per year |
The invoiced cost is roughly 8% of the raise. The economic cost, including the pop, is considerably higher.
Where can I find what a specific IPO cost?
The prospectus cover shows the underwriting discount. The expenses of issuance and distribution table shows the rest. Both are in the 424B4 on EDGAR, free.
Who pays the fees on secondary shares?
The underwriting discount applies to all shares sold, so selling stockholders bear it on their own shares. Other offering expenses are usually borne by the issuer, as disclosed in the underwriting section.
Is a direct listing or a SPAC cheaper?
A direct listing avoids the underwriting spread but incurs advisory and market-maker fees. A SPAC's headline comparison omits sponsor promote and redemption-driven dilution, which are frequently larger than an underwriting spread. Comparing any of the three requires reading the expense disclosures rather than the headlines. See IPO vs. direct listing and SPAC vs. IPO.
Related
IPO underwriting fees · Why do IPOs pop? · Why do companies go public? · Use of proceeds · What is an S-1? · Glossary
Sources
- Regulation S-K Item 511 — expenses of issuance and distribution
- Chen and Ritter, "The Seven Percent Solution," Journal of Finance
- US House of Representatives materials on the Middle Market IPO Underwriting Cost Act (H.R. 2812) — gross spread clustering data
- PwC — IPO cost analyses and surveys of one-time and recurring public-company costs
- NYSE Listed Company Manual — listing and annual fees
- Nasdaq Listing Center — Rule 5900 Series and Initial Listing Guide fee schedules
- FINRA Rule 5110 — underwriting terms and filing requirements
- Issuer final prospectuses on EDGAR