Investment Banking IPO Fees Remain Steady Despite Investigation

Despite highly publicized charges that they've violated antitrust laws by conspiring to fix prices, Wall Street investment banks have continued to consistently charge around 7% to underwrite smaller initial public offerings, the author of an influential study on the issue has found.

The underwriters' steadfastness diverges sharply from the almost immediate reaction by Nasdaq market makers to a federal investigation of potential collusion to maintain wide spreads.

It may be largely because IPO issuers, eager to cash in on the IPO boom and fearful of angering the powerful underwriters, haven't demanded lower fees, concludes University of Florida finance professor Jay Ritter. Issuers, who are in the best position to complain about the fees should they choose to, have effectively been distracted from that issue by questions they have about underpricings of their initial public offerings, he says. ...