Legal Question in Securities Law in Delaware

Total legal cost of NASD registration to trade OTC

If a company seeks to go public and trade OTC.BB what costs in fees and legal hours should be considered normal or average from an attorney who is expertly familiar with the process. Can it be done professionally for $10,000.00? $20.000.00? etc. the filing fees we understand, our concern is the legal hour cost. In that regard, what are the steps an attorney must take, how do the hours break down?


Asked on 6/20/02, 11:11 am

2 Answers from Attorneys

Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Total legal cost of NASD registration to trade OTC

One author's opinion of the costs of a typical traditional IPO in the mid-1990s was:

1. Underwriter's discount from price to public in firm-commitment underwriting, 7 to 10%.

2, Underwriter's commission in best efforts sale: Less than above because of lower risk, say 5 to 7 1/2%.

3. Underwriter's expense allowance - fixed, negotiated fee.

4. Legal fees for issuer's counsel - typically $125,000 to 250,000, which will include a certain amount of 'corporate housekeeping' to clean up years of not quite up-to-snuff recordkeeping, etc.

5. Accounting fees - between $75,000 and 125,000. Can be much higher if audits disclose significant accounting or financial issues.

6. Printing costs - $50,000 to 150,000, maybe more if color sales literature, photos, etc. are used, if creative services are retained, etc.

7. SEC fees - 1/29th of 1% of the maximum aggregae offering price.

8. Blue sky (state registration) fees, $15,000 or more depending upon the number of states where the offering is registered.

9. Registrar and transfer fees - $10,000 to 25,000.

10. NASD fee - $500 + .01% of the gross dollar amount of the offering.

The total estimated cost for a $15 million offering with underwriter's discount would have been $1,450,000 or just under 10% of the amount raised for the example cited by the author.

If a company were trying to raise $1 to $5 million, an offering under Regulation D might be an option, or even a self-underwritten issue, or an SB-1 offering in the $5-10 million range. Total costs can probably be kept close to the 10% figure, but the smaller an offering gets, the harder it is to keep the transaction costs to a reasonable percentage of the net received by the issuer.

I can conceive of an offering where the issuer's legal fees were only $20,000, but it would be an unusual case.

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Answered on 6/20/02, 4:36 pm
Michael Schiller Law Office of Michael I. Schiller

Re: Total legal cost of NASD registration to trade OTC

Attorney fees can range for $10 - $20,000.00 for a small OTC offering. You will need to pay accounting fees and set aside marketing funds. There are other options that you can explore.

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Answered on 6/20/02, 1:17 pm


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