Flotation cost is the total
cost
Cost is the value of money that has been used up to produce something or deliver a service, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which case the amount of money expended to acquire it i ...
incurred by a
company
A company, abbreviated as co., is a Legal personality, legal entity representing an association of legal people, whether Natural person, natural, Juridical person, juridical or a mixture of both, with a specific objective. Company members ...
in offering its securities to the public. It arises from expenses such as
underwriting fees, legal fees, and registration fees. Firms are well-advised to consider the magnitude of these fees, as they also impact how much capital they can raise from an
initial public offering
An initial public offering (IPO) or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also to retail (individual) investors. An IPO is typically underwritten by one or more investm ...
. The higher the flotation cost, the less viable the source.
References
Accounting
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