Why Do Firms Go Public Through Debt Instead of Equity?


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Why Do Firms Go Public Through Debt Instead of Equity? - Columbia Law School

Private firms can gain access to capital markets in several ways. The most well-known approach is through an initial public offering (IPO) of equity, and high-profile firms typically attract a large amount of attention from the popular press when they go public. However, a less publicized approach is going public through an initial public debt offering (IPDO), an alternative option for tapping public markets. One example of an IPDO firm that issued public debt (through a private subsidiary) before issuing public equity is United Parcel Service Inc. The company was founded in 1907, filed its IPO S-1 registration statement on July 21, 1999, and began trading its equity publicly on November 30, 1999. However, the company carried out an IPDO in December 1989, when it issued 8.375 percent 30-year debentures maturing in 2020 for $700 million through its private subsidiary, United Parcel Service of America Inc. The size of this debt offering was in the top 2 percent of all public debt issues that year.