Why would a company choose to issue stock over debt?

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IBPrep · Accepted Answer

Reasons: (1) Already highly levered, adding debt would breach covenants or push the cap structure to dangerous levels; (2) Stock is overvalued, selling 'expensive' currency is cheap financing; (3) Strategic flexibility, preserving debt capacity for future acquisitions; (4) Lower fixed obligations, equity doesn't require interest payments or maturity refinancing; (5) Credit rating preservation, keeping investment grade matters more than EPS dilution; (6) The use of proceeds is risky and equity-like (R&D, early-stage expansion).

Why would a company choose to issue stock over debt?

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