As Borrowing Costs Soar, Equity Becomes the New Frontier for Corporate Finance

The once straightforward strategy of borrowing has become a complex decision for CFOs, thanks to soaring interest rates. This shift is largely due to the Federal Reserve and other central banks increasing interest rates to the highest levels in decades, which has significantly raised the cost of debt financing. Companies across the spectrum—from smaller firms like Myriad to larger entities like Campari and Aston Martin, as well as startups such as Reddit—are turning their gaze towards equity markets as a more viable option for raising capital, especially given that share prices are near record highs. While debt continues to be a critical component of corporate finance due to its cost-effectiveness and tax-deductible interest, the trend towards equity financing could herald substantial changes in corporate finance strategies and the broader market dynamics