IPO University

The commissions paid to brokers for buying or selling stock ranges from 3 to 5 cents a share for institutions. For individuals, broker commissions range from $5 to $10 per trade order, and many brokers even offer free trading. When institutions purchase an IPO at the offer price, they pay no commission. Instead, the underwriter charges the issuing company a gross spread, which is the difference between the public offering price and what the issuing company received. Typically, this spread is 6% to 8% of the IPO’s offering price. The profitability of doing IPOs is one important reason why investment banks focus on developing this business.