IPO Auditing Fees In the Third Year of Market Uncertainty

Average auditor fees paid by issuers that have completed initial public offerings on U.S. exchanges or the OTC Bulletin Board have been on a steady rise since 2005.  Despite economic turmoil, the average amount paid to accounting firms by issuers that completed IPOs in 2008 and 2009 exceeded $1 million.  Through August, however, 2010 is shaping up to look more like 2007 when the average cost of getting the IPO books in order was $892,000.

Among underwritten IPOs launched this year, the $5.55 million auditor fee paid to Ernst & Young Hua Ming by China Hydroelectric Corp. in connection with its $96 million offer is the largest (SEC file no. 333-163558).  However, it is the only deal so far this year where the auditor fee has exceed $3 million.  In 2009, eight of the 63 companies that completed IPOs in U.S. markets paid auditor fees above $3 million. 

Prior to China Hyro, the last IPO with a larger auditor fee was Visa Inc.'s $17.86 billion deal in 2008, for which KPMG earned $13 million (file no. 333-147296).   2008 saw an unusual concentration of IPO auditor fees below the $200,000 threshold, encompassing approximately 45% of the companies that went public.  By contrast approximately 24% of the 2009 and 21% of 2010 deals have auditor fees that fall below the $200K level, which is more in line with recent historical experience.

The information reported herein was gathered using IPO Vital Signs, a Web-based system that includes all SEC registered IPOs, including REITs and those non-U.S. IPO filers seeking to list in the U.S. markets. IPO Vital Signs does not track closed-end funds, best efforts or non-underwritten deals, or IPO offerings for amounts less than $5 million.