The question is a little strange because IPO refers to just one event - the initial offering f stock to the public. A company can issue stock as many times as it wants to and the question is usually framed "when does a company issue stock and when does it issue bonds?". That is a fundamental question of corporate finance and there is not a clear answer. A few things that are clear:
a) Issuing stock is more expensive for the company. Because of the increased risk of stock, investors demand a higher return from stock
b) Issuing bonds increases the bankruptcy risk of your company
c) Issuing bonds increases the leverage and the risk for current equity holders
d) You may not be able to issue bonds (because nobody will buy them) but someone will always buy stock
IPO's are created when a company needs cash flow & decides it is time to issue stocks & go public (investors own the company). Bonds are a way to keep the company financially viable & still private. With bonds, you are investing your money with a guaranteed rate of return as stated within the bond which is a more stable way to invest your money. With stocks you're gambling because the value of the stock depends on the mood of the investors (fear comes into play)!!! You're gambling that the stocks will increase in value when, in fact, the bottom can literally fall out!!! Although the rate of return might not be as enticing, bonds are considered a MORE stable investment compared to stocks!!!
That is NOT a technical explanation but one as simple as I can think of!!!
bonds and IPOs are both used for raising capital for a business.what r the conditions under which a company issues a bond or starts an IPO ?
P.S. i am new to finance , so please explain in a layman's terms.
