The Facebook IPO

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Facebook is paying 1% in fees for its proposed IPO (Initial Public Offering), and the underwriters are expected to make between $50 million and $100 million to take the company public. In Canadian mining finance terms, that is a punch in the gut. The average deal we tracked in 2011 paid underwriters 9% in fees, 6% in cash and 3% in options. If Facebook were a mining company completing an IPO, the profit from the offering would have rocked some banker’s world.

Some of the discount in fees results from Facebook being a status IPO; every bank wanted the deal because Facebook is a household name the world over. Some of the discount is also due to size. The deal is so large that even lower fee levels pay well. In general, however, the huge fees junior mining companies pay versus other companies elsewhere in the world reinforces the pain of the mining finance industry.

 

If you’re a mining company, use Oreninc’s data to help negotiate fees. You will not get to Facebook’s level, but you can probably get closer.

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