Analysis Of The Sarbanes Oxley Act Of 2002 Essay examples

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Initial Considerations
There are a lot of components of an IPO. There are a lot of considerations and requirements that should be met before a company goes public. For example, historical financial statements are necessary to evaluate the company’s value and risk. Many aspects must be taken into consideration before a company decides to go public. In fact, the process is so complex that many companies decide to withdraw in the mist of it. Table 1 below shows the number of companies withdraws from the process after the passage of the Sarbanes-Oxley Act of 2002:
The Cost of an IPO
Though used to raise capital, companies incur considerable amount of cost directly related to an IPO. For instance, a company going public incur legal cost, accounting or auditing and advisory costs, SEC filing fees, underwriter’s costs, and stock exchange listing fees. Without considering the underwriters’ fee, an IPO cost on average more than $3 million (Allison et al, 2008). In recent years, the cost of an IPO has increased due to increasing government and legal requirement resulted from the Sarbanes-Oxley Act of 2002. For instance, Allison (2008) writes that IPO expenses rose 9.2% from 2005 to 2007, and that is even without considering the underwriters’ fee and commissions. In fact, according to a publication from PwC’s Deal Practice (2012), about 87 percent of CFOs shares that the direct cost of IPO were higher than they expected. Hence, PwC claims that a company considering going public spends…

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