Why Do Firms Go Public through Debt Instead of Equity?
30 Pages Posted: 20 Mar 2012 Last revised: 27 May 2018
Date Written: May 15, 2018
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: Suggested Citation