Corporate bonds are not a slam dunk win over investing in dual class shares of an IPO.
What kind of corporate bonds specifically? Is it Super safe AAA rated?[1] Or high-yield (aka "junk bonds")?[2]
If an investor wants big returns like he's hoping for Snap's IPO, buying safe AAA bonds isn't going to match that. E.g. Microsoft's 10-year bond only pays 3.34%.[3] That low interest rate barely above Treasury bills is the "price you pay" for safety. If you want to take more risk with a "BB-" corporate bond from Frontier Communications[4], that will pay 11%. That still won't match the potential upside of high flying stocks and the investor has to factor in Frontier's increased potential for defaulting on that debt. (Frontier wouldn't have to pay 11% if all lenders were confident the company would pay it back.) It's not just the bankruptcies to worry about; lots of corporations default on their debts.[5][6]
It's perfectly rational for some investors to calculate a risk-vs-reward and conclude that investing in shares with reduced voting power is better putting money into low-grade corporate bonds.
Well, that's where the institutional smart money is, buying up and depressing yields on high quality corporate debt.
Bond market pricing also benefits large investors. A small guy buying 20-30 bonds will pay higher markup, higher commission and be quoted higher price than a large player with an 8-digit buy order.
In a stock market (outside the dark pools) two players will get quoted roughly the same market price. The larger guy is likely to be at a disadvantage, as exposing a large buy order might lead to supply tightening.
