The total direct costs of underwriting an equity IPO:
A)tends to increase on a percentage basis as the proceeds of the IPO increase.
B)is generally between 7 and 8 percent, regardless of the issue size.
C)can be as high as 25 percent for small issues.
D)excludes the gross spread.
E)excludes both the gross spread and the underpricing cost.

Question

Quizplus · Accepted Answer

For small issues, the total direct costs of underwriting an equity IPO can be significantly higher, sometimes reaching up to 25 percent due to fixed costs and economies of scale not being as effective.

The Total Direct Costs of Underwriting an Equity IPO