Differences

When a company issues bonds, it is borrowing money from future bondholders or lenders. The principal must be repaid with interest. Equity issuance involves selling additional stock in the stock market, which dilutes the percentage of shares owned by existing stockholders. Bond issuance does not dilute shares because, unlike stockholders, lenders do not have any equity ownership in a company.

Tax Benefit

Companies may choose to issue bonds over stocks for the tax benefits. Bond issuers must make consistent interest payments to bondholders, but these payments are tax-deductible.

Risks

When a company issues debt or sells bonds in the market, it becomes more vulnerable in the event of a bankruptcy filing. Bondholders gain priority in a bankruptcy filing and can win control of a company if the debtor misses interest payments on the loans.

Financial Analysis

References

Resources

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