A recent paper titled, “Why do firms go public through debt issuance instead of equity?” reviews the characteristics of companies that choose to access the public market through debt issuance. There were approximately 600 initial debt offerings from 1987 to 2016. Public debt issuers tend to be larger companies with higher ratios of operating cash flows to capital expenditure and are often sponsor-backed. There is no industry concentration. A small percentage (16%) subsequently issue equity through an IPO. When companies with public debt eventually do go public, they face lower underpricing than companies in the same industry that undertake traditional equity IPOs.
