Why Do Firms Go Public through Debt Instead of Equity?

30 Pages Posted: 20 Mar 2012 Last revised: 27 May 2018

See all articles by Denys Glushkov

Denys Glushkov

University of Pennsylvania - The Wharton School, Wharton Research Data Services (WRDS); Acadian Asset Management LLC

Ajay Khorana

Georgia Institute of Technology - Finance Area

P. Raghavendra Rau

University of Cambridge

Jingxuan Zhang

University of Cambridge - Finance

Multiple version iconThere are 2 versions of this paper

Date Written: May 15, 2018

Abstract

We analyze a sample of private firms that go public through an initial public debt offering (IPDO) as an alternative to going public through equity (IPO). Firms that choose the IPDO route are larger, more likely to be backed by a financial sponsor such as a venture capital or private equity firm, and less likely to face information asymmetry than traditional IPO firms. Only a quarter of these firms eventually conduct an IPO, but those who do face lower underpricing than their contemporaneous private peers who do not have public debt at the time of going public.

Keywords: Initial public debt offerings, information asymmetry, going public decision, financial statement informativeness

JEL Classification: G30, G32

Suggested Citation

Glushkov, Denys and Khorana, Ajay and Rau, P. Raghavendra and Zhang, Jingxuan, Why Do Firms Go Public through Debt Instead of Equity? (May 15, 2018). Available at SSRN: https://ssrn.com/abstract=2024375 or http://dx.doi.org/10.2139/ssrn.2024375

Denys Glushkov

University of Pennsylvania - The Wharton School, Wharton Research Data Services (WRDS) ( email )

WRDS, St. Leonard's Court
3819 Chestnut St, suite 300
Philadelphia, PA 19104
United States
2158986705 (Phone)

HOME PAGE: http://ssrn.com/author=664253

Acadian Asset Management LLC ( email )

260 Franklin Street
Boston, MA 02110
United States

Ajay Khorana

Georgia Institute of Technology - Finance Area ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
404-894-5110 (Phone)
404-894-6030 (Fax)

P. Raghavendra Rau (Contact Author)

University of Cambridge ( email )

Cambridge Judge Business School
Trumpington Street
Cambridge, Cambridgeshire CB21AG
United Kingdom
3103626793 (Phone)

HOME PAGE: http://www.raghurau.com/

Jingxuan Zhang

University of Cambridge - Finance ( email )

United States

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