Existing literature generally finds that privately issuing firms are distressed while publicly
issuing firms are not. These findings seem to suggest that distressed firms rely on private equity
issuance as their main source of common equity financing. In this paper, I examine the distribution
of public and private equity issuances against distress, in order to test whether distressed firms
primarily rely on private equity issuance. Consistent with the literature, I find that private issuance
frequencies increase as distress levels escalate, while public seasoned equity offerings (SEOs) are
distributed evenly regardless of degree of distress. Despite this finding, my study also finds that
public equity issuance still constitutes roughly half of total issuance frequencies for even the most
distressed firms. These collective findings reject the incumbent hypothesis that distressed firms
primarily issue equity privately, but instead suggest that both public and private equity are
important tools of financing for distressed firms.
Keywords：Equity Issuance, SEO, Private Placement, Distress, SDC Platinum