| The Cost of Being a Public Company
| |
| | Board Compensation$ 247,000
|
| By William Cate
| |
| | Lost Productivity$2,500,000
|
| August 2004
| |
| | Other Sabanes-Oxley costs$ 246,000
|
| [
| |
| | Governance Setup Costs$174,000
|
| [
| |
| | TOTAL$7,404,000
|
| The Cost of Going Public
| |
| | Investor Relations Costs
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| The average cost for a traditional U.S.
| |
| | In addition to increased compliance
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| Securities and Exchange registration and
| |
| | costs, public companies are faced with
|
| listing on the Over-the-Counter Bulletin
| |
| | the ongoing obligation to find buyers for
|
| Board (OTCBB) has risen to about
| |
| | their shares. An OTCBB company with an
|
| $1,500,000 in 2003. If your company wants
| |
| | effective float of one million shares and
|
| to list on Nasdaq, the cost will be an
| |
| | an average share price of $6.00/share
|
| additional $500,000. Registration and
| |
| | should budget $1.2 million to maintain
|
| listing costs have risen by about 30% in
| |
| | that share price for the year. A Nasdaq
|
| the past two years thanks to stock
| |
| | or NYSE company with an effective float
|
| scandals that have significantly
| |
| | of 2 million shares and an average price
|
| increased GAAP audit costs and increased
| |
| | of $15/share should budget about $4.0 to
|
| regulatory compliance requirements that
| |
| | maintain their share price.
|
| resulted from the Sarbanes-Oxley Act.
| |
| | Three Solutions to Reducing Costs of
|
| The Reasons that the Costs of Being
| |
| | Being a Public Company
|
| Public Have Increased
| |
| | 1. Grant Thornton International, an
|
| Section 404 of the Sarbanes-Oxley Act
| |
| | accounting/business adviser to midsize
|
| addresses accounting control issues for
| |
| | firms, reports a steady rise in the
|
| U.S. Domestic public companies. Section
| |
| | number of companies going private after
|
| 404 requires increased corporate
| |
| | passage of Sarbanes-Oxley. Most are OTCBB
|
| responsibility and accountability. This
| |
| | companies, with management buyouts as the
|
| means increased financial disclosure that
| |
| | preferred means of taking these firms
|
| results in increased audit and
| |
| | private.
|
| liability-insurance costs.
| |
| | 2. Mergers of existing public companies
|
| Being Public in 2003
| |
| | have been the standard alternative to
|
| The legal, accounting and other costs of
| |
| | taking the company private.
|
| being public rose to an estimated average
| |
| | 3. Beowulf Investments [ advises both
|
| of $2.86 million for OTCBB firms in 2003.
| |
| | U.S. public and private companies to move
|
| Major public companies paid, on average,
| |
| | offshore and structure themselves as
|
| $7.41 million to trade on Nasdaq, AMEX
| |
| | foreign corporations. As a Non-U.S.
|
| and the NYSE, according to a survey by
| |
| | Company, their registration and
|
| Foley & Lardner LLP.
| |
| | compliance costs will drop below
|
| The Foley & Lardner 2003 survey breaks
| |
| | $500,000. If the client companies follow
|
| down the 2003 costs as follows:
| |
| | the Beowulf Investments Investor
|
| OTCBB Firms, which they call small public
| |
| | Relations program, their costs should be
|
| companies
| |
| | below $100,000/year.
|
| Director and Officer Insurance$850,000
| |
| | The days for an American private company
|
| Accounting$824,000
| |
| | to go public as a status symbolare over.
|
| Legal$468,000
| |
| | The SEC compliance costs will either
|
| Board Compensation$313,000
| |
| | force U.S. Domestic Companies to relocate
|
| Lost Productivity$160,000
| |
| | offshore or preclude them from taking
|
| Other Sabanes-Oxley costs$100,000
| |
| | advantage of the money raising benefits
|
| Governance Setup Costs$147,000
| |
| | of being a public company. For U.S.
|
| TOTAL$2,862,000
| |
| | companies, it comes down to a choice
|
| Nasdaq, NYSE, AMEX firms which they call
| |
| | between reduced access to capital or
|
| large public companies
| |
| | reduced jobs in the United States. I
|
| Director and Officer Insurance$2,200,000
| |
| | suspect that most CFOs will favor moving
|
| Accounting$1,200,000
| |
| | the jobs offshore to going bankrupt.
|
| Legal$ 841,000
| |
| |
|
