The Distribution of Fees within the IPO Syndicate

Financial Management, Vol. 30, Iss. 4, Winter 2001

Posted: 27 Dec 2001

Abstract

This paper examines the division of fees within the IPO underwriting syndicate using data on 4,186 US IPOs in the 1990s. Like the 7% gross spread, the standard contract of 20% management fee, 20% underwriting fee, and 60% selling concession has become more common in recent years. There exists, however, significant variation from these standard percentages. The percentage of the total spread paid as selling concessions increases with offering size. This result is attributed to differential economies of scale in managing and underwriting an IPO versus selling it and to differences in bargaining power.

Suggested Citation

Torstila, Sami, The Distribution of Fees within the IPO Syndicate. Financial Management, Vol. 30, Iss. 4, Winter 2001. Available at SSRN: https://ssrn.com/abstract=292984

Sami Torstila (Contact Author)

Aalto University ( email )

P.O. Box 21210
Helsinki, 00101
Finland
+358 40 353 8069 (Phone)

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