Dictionary of Accounting Terms: flotation cost
flotation cost
cost of issuing new securities in the market. It consists of (1) the investment banker compensation representing the price the issuer receives versus the price the public pays (commonly referred to as the underwriting spread) and (2) expenses incurred by the issuer such as for legal, accounting, and printing fees. Flotation costs are usually higher for stocks than for bonds. Also, it is a higher percentage of gross proceeds for smaller issues than larger ones.
