Theresa Shutt from the Conference Board and one of the study's authors said, "The study looked at the two major components of IPO costs - direct and indirect costs. Direct costs such as underwriter, lawyer and accountant charges and listing fees to the market where the shares will trade are paid directly by the company. Indirect costs are incurred when the IPO issue is underpriced. Money "left on the table" by the company is an indirect cost to the company. In both measures, Canadian issuers benefited from lower costs".
Clare Gaudet, Vice-President of Corporate Finance Services at the Toronto Stock Exchange said, "The Conference Board's findings confirm the efficiency of Canada's capital markets and helps build issuers' confidence in the value of our market."
Comparing similar-sized IPOs completed on the countries' senior stock markets (the TSE, the NYSE and Nasdaq) from January 1998 to September 1999, the study confirms a 1994 Conference Board finding that direct costs of going public are lower on the TSE than on Nasdaq or NYSE for all offering sizes. Weighted by the size of offering, direct costs were 5.5% on the TSE, 8.7% on Nasdaq, and 6.6% on the NYSE.
Indirect costs were measured as the percentage difference between the offer price and the closing price on the first day of trading. When measured by size category, IPOs on the TSE market were underpriced less than IPOs on either Nasdaq or NYSE. Weighted by offering size, IPOs on the TSE were underpriced by an average of 5.8%, compared to 49.6% on Nasdaq, and 10.9% on the NYSE.
Copies of the Conference Board Report are available at: www.conferenceboard.ca
