Erik Salz has more than 15 years experience in equity research, most recently as an equity analyst at JP Morgan, where he particularly focused on IPO research and multi-industry coverage. During that time, he has been involved in more than 60 IPO projects.
With Erik, we wanted to get a better understanding of how sell-side analysts perform their work in relation to an IPO, how it relates to the coverage post-listing, and the lessons he has learned about how to engage with analysts and investors for a successful transaction.
🎧Listen on: Spotify | Apple Podcasts 🎧
If you have feedback, or there are any topics you would like us to cover on the show, please reach out at contact@ipostories.com
Disclaimer: this discussion is not financial advice, nor an investment recommendation, nor a solicitation to buy or sell any financial instruments, or an offer for financial services or any other transaction. The information contained in the recording have no contractual value and are destined for an informational purpose only. Amundsen Investment Management and the participants on this podcast may have holdings in the companies being discussed.
[0:28] Per Einar Ellefsen: Today we’ll talk about the role of the research analyst with Erik Salz. Erik has more than 15 years of experience in equity research, most recently as an equity analyst at J.P. Morgan. He has focused particularly on IPO research, covering more than 60 IPO transactions across multiple industries.
[0:58] Per Einar Ellefsen: With Erik, we wanted to better understand how sell-side analysts perform their work in relation to an IPO, how it connects to post-listing coverage, and what lessons he has learned about engaging with analysts and investors for a successful transaction.
[1:36] Gautier Rousseau: Erik, good morning—thanks for coming. It’s great to have you on the show. We’ve interacted in the past in the context of IPOs when you were an equity research analyst at J.P. Morgan, and I wanted to have you here to talk about the IPO research process. Usually our podcasts last 30–40 minutes, but looking at all the questions and topics we could cover, I think this one will run a bit longer. But Erik, maybe start by introducing yourself.
[2:02] Erik Salz: Thank you, Gautier. It’s a pleasure to be on the show and talk about equity research in the context of IPOs. I’ve held different equity-research roles on both the buy and sell side for several years, most recently eight years at J.P. Morgan, where I focused mainly on IPO projects—more than 60 different IPO transactions across sectors and across the EMEA region.
It’s been a great platform to satisfy my interest in companies, valuation, and the process of taking them public. I’ve been able to interact with many talented colleagues who are sector specialists in research, and also with a lot of different investor types like yourselves. That interaction—especially the pre-deal investor-education phase—is central to the research role. That’s how you and I met and had lots of interesting debates on companies preparing to issue equity.
[3:01] Gautier Rousseau: So 60 IPO projects—how many actually ended up being listed?
[3:05] Erik Salz: Roughly half. There are of course many reasons why some succeed and others don’t—and we’ll get into that. As earlier episodes of your show have highlighted, it’s a complex process with many moving parts. Sometimes there’s an industry sale, a private-equity exit, or simply a valuation gap between buyers and sellers that causes a delay or a failed listing.
[3:45] Gautier Rousseau: We’ll definitely dive into those success and failure factors. But maybe start with the basics—can you explain what equity research actually is, and how it differs in the context of an IPO?
[3:58] Erik Salz: Sure. Simply put, equity-research analysts are tasked with forming a view on listed companies—their valuation and whether investors should buy or sell the shares. They build financial models, craft an equity story, apply valuation methodologies, and conclude whether a company’s shares are undervalued or overvalued.
In the context of an IPO, it’s different—there’s no live share price yet. Research’s role is primarily pre-deal investor education, which takes place toward the end of the IPO process. When a company is close to announcing its Intention to Float (ITF), research typically becomes involved.
There are three main stages: first, an analyst presentation about two months before the ITF, where syndicate analysts visit the company and get a full briefing from the CEO, CFO, and key management. Second, analysts go back, build their financial model, and draft their report and presentation to explain the equity story, benchmarking it against peers. Third, if the company proceeds with the ITF, analysts go on the road—physically or virtually—to present the story to investors and gather feedback.
[6:10] Gautier Rousseau: Just to clarify—you said “ITF” means Intention to Float. So until that point, everything is confidential. Once it’s public, you can actually market the transaction to investors. You also said it’s about conveying the equity story—but do you actually make a buy or sell recommendation at that stage?
[6:33] Erik Salz: No.
[6:33] Gautier Rousseau: Why not?
[6:35] Erik Salz: Because during the IPO, research’s job is to explain, not to recommend. Analysts only publish formal ratings after the listing, once the blackout period ends and they launch coverage. Different banks have slightly different policies on how much valuation discussion is permitted, but analysts will always have their own forecasts and peer benchmarks. So while there’s no explicit “Buy” or “Sell,” the report provides enough detail—financial forecasts, valuation ranges, peer comparisons—to help investors form their own view.
[7:56] Gautier Rousseau: Valuation obviously is a key focus for both the company and the bankers. Since bankers may have promised a certain valuation range to win the mandate, how independent are you as an equity researcher in that process?
[8:37] Erik Salz: Good question. Research is independent—there’s a strong “Chinese wall” between investment banking and research. Analysts take an independent view. That said, in the private information-sharing process, you inevitably receive data prepared by the banks and the company, and there’s limited opportunity for outside channel checks because of confidentiality.
Still, independence is respected, and everyone benefits from it. Analysts’ questions often surface issues or perspectives the company or bankers hadn’t emphasized. Those insights strengthen the equity story.
[9:56] Gautier Rousseau: And how much interaction do you have with bankers or the company when writing your report—do they review or edit it?
[10:36] Erik Salz: It’s a highly formalized process, rightly so to preserve independence. Analysts can submit written questions and receive written answers. Companies and advisors then fact-check reports for accuracy, not opinion. Disagreements about interpretation are handled carefully—analysts must word risk factors precisely so they can stand behind them.
[11:33] Gautier Rousseau: J.P. Morgan had a dedicated IPO research team, unlike other banks that simply assign sector analysts to new mandates. Why that model?
[12:08] Erik Salz: It works well when IPO activity is high. IPOs require a lot of standardized, process-driven work—building models, writing reports, coordinating with sector teams—so a specialized team brings efficiency. Sector analysts can stay focused on their ongoing coverage while IPO specialists handle the heavy lifting.
It’s also useful when a new issuer doesn’t fit neatly into an existing sector—say, a Belgian football club or a visual-effects company. A generalist IPO team can handle such cross-sector situations more flexibly.
[13:44] Gautier Rousseau: Let’s go deeper into scope. During pre-deal investor education, how adequate is the information you receive?
[14:09] Erik Salz: It varies case by case. The best-prepared companies already know their future financial-reporting structure and key disclosures by the analyst presentation. Others are still finalizing their prospectus or segmentation, which makes things harder. Analysts spend a lot of time on financial detail; if that’s not ready, you’re on the back foot. Having full, consistent numbers early is critical.
[15:28] Gautier Rousseau: Can you do independent channel checks, as you would for a listed stock?
[15:47] Erik Salz: Not really, due to confidentiality. You can’t call competitors and say you’re working on a private company’s IPO. The main value add is benchmarking—comparing the issuer’s metrics, growth, margins, ESG profile, and risks against listed peers, using prior research and sector knowledge.
[16:40] Gautier Rousseau: Yes, benchmarking is key—otherwise the report is just a summary of the prospectus.
[17:27] Erik Salz: Exactly. The more time investors have to digest that analysis, the better their decisions. In the U.S., S-1 filings are public much earlier; France has the Document de Base. The U.K. is moving that way, but in many European cases information still comes too late.
[19:32] Gautier Rousseau: What’s the hardest part of the equity story to research before listing?
[19:32] Erik Salz: Four key elements:
- Why go public—why IPO versus other funding?
- What makes the company unique versus peers?
- Are the financial forecasts credible?
- What are the key risks—especially competition?
Also crucial is alignment: management’s incentives. Often, details of post-IPO compensation plans aren’t finalized at PDIE stage, yet investors care deeply about whether management is aligned for the long term.
[21:41] Gautier Rousseau: Yes, and many management teams leave soon after IPOs—raising alignment concerns. So, in your experience, which IPO rationales resonate most with investors?
[22:53] Erik Salz: Investors like growth stories—clear use of proceeds, a credible expansion plan, and a reason to be listed (for M&A currency, visibility, or staff incentives). Carve-outs from larger groups also resonate when the new entity’s focus becomes clearer.
Pure secondary offerings—where existing shareholders just sell—face more skepticism. Investors ask, “If it’s such a great story, why are you selling?” They can still succeed, but mixed or primary-driven deals are easier to support.
[25:26] Gautier Rousseau: For CEOs and CFOs listening, any advice on how to prepare for interactions with research analysts?
[25:40] Erik Salz: Yes—three things:
- Have your financials finalized before the analyst presentation.
- Be crystal clear on your IPO rationale.
- Do your own peer benchmarking early.
Companies often say they’ve met many investors in early-look meetings, but those decks are usually light. Provide real data early—it pays off later when facing research and PDIE investors.
[27:55] Gautier Rousseau: Exactly—IPO readiness takes time. You need solid, audited numbers years ahead. Can you tell when a company isn’t IPO-ready?
[28:49] Erik Salz: Yes. Inconsistent historical financials are a red flag, as are unclear disclosure structures or an unclear rationale. High growth with little track record can work—but only with strong explanation.
[29:33] Gautier Rousseau: Let’s move to the investor-education phase. What type of investors engage in PDIE meetings?
[30:10] Erik Salz: A mix: sector specialists, long-only funds, hedge funds, and IPO-focused investors like Amundsen. Some are new to the story—they want a full hour on the basics. Others, like you, come prepared with detailed questions, leading to short but focused debates.
[31:45] Gautier Rousseau: Have you noticed a decline in participation, especially in small- and mid-cap IPOs?
[31:45] Erik Salz: Not during PDIE itself—my schedules were always packed. But post-deal, books may have fewer lines, especially in Europe, meaning fewer investors actually take positions. That’s more a function of market liquidity than meeting volume.
[33:12] Gautier Rousseau: How useful is investor feedback from PDIE meetings?
[33:12] Erik Salz: Highly useful when it comes from informed investors who’ve followed the story. Management and selling shareholders should genuinely listen—it can improve messaging and valuation realism.
[34:01] Gautier Rousseau: Any way to improve the process?
[34:01] Erik Salz: Earlier engagement. Let research or selected investors give feedback sooner—still within compliance boundaries—to avoid groupthink and refine the story ahead of launch.
[34:39] Gautier Rousseau: Post-IPO—do you always initiate coverage?
[35:01] Erik Salz: Yes, after the 40-day blackout. Typically the sector team publishes the initiation. I’ve rarely seen a case where it wasn’t done.
[35:28] Gautier Rousseau: How often do you initiate with a Sell?
[35:28] Erik Salz: Almost never. You’re free to, but it’s uncommon. Occasionally we might start Neutral and downgrade later, as happened with Storskogen.
[36:19] Gautier Rousseau: Liquidity is another post-IPO risk. How can companies preserve trading activity and engagement?
[36:53] Erik Salz: Liquidity depends mainly on allocation strategy—who gets shares, how much free float you create, how balanced your investor base is. Research can’t control that, but it’s crucial. Poor liquidity means less coverage and visibility later.
[38:10] Gautier Rousseau: And what about post-IPO communication—any advice for CEOs/CFOs on their first earnings calls?
[38:56] Erik Salz: Do dry runs before listing. Align internal teams so the first results go smoothly. Listen to peers’ calls to understand typical questions—growth, margins, guidance. Be ready, consistent, and confident. Poor first communication can move the share price for the wrong reasons.
[40:26] Gautier Rousseau: And the timing of the IR hire—before or after IPO?
[40:41] Erik Salz: Before, ideally. It’s an invaluable learning experience and allows IR to coordinate internally early. Late appointments mean they’re learning on the job during the roadshow.
[41:44] Gautier Rousseau: Let’s discuss IPO discounts. If analysts typically have 25–30 percent upside on their “Buy” ratings, why do IPO discounts often stop at 10–20 percent?
[42:36] Erik Salz: Good point. Investors often ask for a 10–20 percent IPO discount. Yet many listed stocks already have analyst price targets implying 30 percent upside without moving. So price targets aren’t everything.
What really matters is confidence in forecasts and guidance. Sophisticated investors care more about management credibility and trajectory than nominal upside.
[44:38] Gautier Rousseau: Exactly—meeting or beating guidance is how you earn a premium and close the IPO discount over time.
[45:13] Erik Salz: Agreed. Management should guide conservatively but credibly. IPOs are career milestones—start by building trust. Markets will forgive external hiccups, but not poor preparation or missed promises.
[46:07] Gautier Rousseau: Let’s touch on ESG. Research reports now always include ESG sections, even in PDIE phases. Do investors really care, or is it a tick-the-box exercise?
[46:39] Erik Salz: ESG has become much more embedded in equity stories, especially in Europe. Governance has always mattered—board composition, management alignment. The E and S factors are more sector-specific: sourcing materials, environmental targets, workforce practices, etc.
Different regions emphasize it differently—Nordics, Netherlands, and France are ahead, but U.K. and U.S. investors are catching up fast.
[48:31
] Gautier Rousseau: And lack of ESG disclosure can even exclude you from some mandates. So start early—publish a sustainability report and governance framework before listing.
[48:51] Erik Salz: Exactly. Regulations will soon standardize disclosure further, helping both investors and companies benchmark ESG performance more effectively.
[49:50] Gautier Rousseau: Any fun or memorable IPO stories?
[49:50] Erik Salz: The IPO of JDE Peet’s, which we prepared just as COVID hit. We switched overnight from physical to fully virtual PDIE—and it was a success. Everyone at home, on Zoom, in T-shirts. It showed how resilient and adaptable the IPO process can be.
[50:42] Gautier Rousseau: Was COVID good for JDE Peet’s, given all that coffee consumed at home?
[50:49] Erik Salz: Possibly—but definitely not for travel retail or office coffee!
[51:02] Gautier Rousseau: Any company you’d love to cover in a future IPO?
[51:02] Erik Salz: Ikea would be fascinating, though unlikely—and Lego too. Great brands, great stories. Realistically, companies like Galderma or CVC could be very interesting near-term IPOs.
[52:04] Gautier Rousseau: Yes, those are names we hear about as well. Thank you, Erik—this was great.
[52:20] Erik Salz: Thank you, take care.
[52:23] Per Einar Ellefsen: Thank you for listening to IPO Stories. In future episodes, we’ll host CEOs, CFOs, advisors, and other participants in the IPO process to learn from their experiences—like from Erik today. If you enjoy the show, please follow us on Spotify or Apple Podcasts and share it with others. For questions about the IPO process you’d like us to discuss with future guests, reach us at contact@ipostories.com.
Recent Comments