Why might a company choose to issue bonds instead of stocks?

A company may choose to issue bonds instead of stocks primarily to raise capital without diluting ownership. When a company issues bonds, it is borrowing money from investors with the promise to repay the principal amount along with interest at a later date. This means that the existing shareholders retain their ownership and control over the company since no new shares are being issued.

In contrast, issuing stocks would involve selling ownership stakes in the company, which would dilute the existing shareholders' ownership percentage. This is particularly important for companies that want to maintain control among a small group of owners or have a strong vision for the business that they want to sustain without influence from new shareholders.

While bonds do require interest payments, they allow companies to finance their operations or expansion plans while keeping ownership intact. Therefore, using bonds as a financing method is strategic for companies focusing on maintaining their equity structure and minimizing the impact on existing shareholders.