Project Saltmarsh — IPO Readiness & Pricing
A 2-hour Equity Capital Markets / IPO case study with a complete model answer
The Situation
Saltmarsh Bioscience, Inc. makes bioprocess consumables and analytical instruments for biologics manufacturers and contract development organizations.
Saltmarsh Bioscience, Inc.
- Sector
- Life sciences tools — bioprocess consumables, benchtop and in-line analytical instruments, and validation and service contracts sold to biologics manufacturers and contract development organizations
- Size
- Geography
- United States; headquartered in Portsmouth, New Hampshire, with a listing contemplated on the New York Stock Exchange in January 2027
- Ownership
- Situation
The Prompt
You are staffed on an Equity Capital Markets / IPO engagement for Saltmarsh Bioscience, Inc. You have 120 minutes to work through the materials and produce an answer deck and an Excel model.
Supporting Materials
What you are handed at the start of the case, in the format a real process would use.
What You Have to Produce
The deliverables, in the order the committee will read them. The exercise runs 120 minutes.
PART 1
Underwriter Case and the forward period
PART 2
Selected publicly traded companies
PART 3
Selected precedent initial public offerings
PART 4
Fully distributed valuation
PART 5
The offering-size decision
PART 6
The file range and the offer price
PART 7
Funds flow, pro forma capitalization, ownership and dilution
PART 8
The pricing deck
How to Approach It
The order a strong candidate works in, and why. This is the shape of the answer — the finished answer deck and Excel model are in the solution set below.
- 01
Settle the basis before you compute a single multiple
- 02
Calendarize the forward period and check it is possible
- 03
Screen both extracts before you compute anything
- 04
Cut the offering set four ways, and be suspicious of the easy cut
- 05
Solve the size and the price together, not one after the other
- 06
Bridge all the way down, and make ownership sum
Key Concepts
The ideas this case is built on. Know these cold and the case becomes a question of execution rather than knowledge.
Fully distributed value
What the shares should be worth once the offering has seasoned and the market prices the issuer on the same basis as the companies it trades with. It is the anchor the whole exercise hangs off, and it is not the offer price: an initial public offering prices at a discount to it, because the buyers are taking size in a security with no trading history and no established holder base. Keeping the two apart is the discipline this archetype tests. A model that computes a valuation and then calls it a price has skipped the only step that makes an IPO different from every other valuation exercise.
The IPO discount and the file range
The discount is the gap between the offer price and fully distributed value at the moment of pricing, and it is evidence rather than judgment: prior offerings tell you what a given free float costs. The file range is then built from the observed ends of the relevant band and rounded outward, because a range that exactly brackets the central case has nowhere to go when the book is soft. Three price levels exist by the end of the exercise — the filed range, the priced level, and fully distributed value — and collapsing any two of them into one is the defining error of the archetype.
Free float, index inclusion and the offering-size decision
How much stock is sold determines the free float, the float determines the discount, and the discount applies to every share in the deal — so a larger offering is not simply more money. There is also a threshold effect: below a certain free float an offering does not attract index-tracking demand, and the evidence in the precedent set shows what that costs after pricing rather than at it. That makes the size question two-sided. Too small and the offering forgoes the threshold; too large and it pays for float it does not need. The maximum is interior, which is why the ladder has to be built rather than reasoned about.
Cornerstone allocation and the confound underneath it
Anchor investors who commit before the bookbuild opens and take their allocation in full de-risk a deal and are worth something in discount. Measuring how much is where candidates go wrong. Cornerstoned offerings tend not to be randomly distributed across float sizes, so a simple cross-tabulation of cornerstoned against uncornerstoned deals measures the cornerstone and the float at the same time and overstates the effect. Measuring inside each float bucket holds the confound constant. It is a small piece of statistical hygiene and it is the difference between a number an exhibit can carry and one a client will take apart.
Primary versus secondary, and the pre-money to post-money bridge
Primary shares are newly issued: the proceeds go to the company, fund a use of proceeds, and dilute every existing holder proportionally. Secondary shares are sold by existing holders: the proceeds go to them, appear nowhere in the company's funds flow, and dilute only the seller. Running them together inflates the company's sources, understates net leverage, and misstates who bore the dilution. The bridge runs from the fully distributed enterprise value, through pre-offering net debt less the primary proceeds that retire it, to equity value, divided by the post-money share count.
The over-allotment option as a governance event
A 15% over-allotment option granted by the selling holders looks like a stabilization mechanic and is also a change in the ownership table. Where a sponsor sits just above a majority after the base deal, a full exercise can take it below, and crossing that line ends controlled-company status and the exchange exemptions that come with it, from independent-board composition to committee independence. It has to be planned for at pricing rather than discovered at settlement. Sizing the base deal so the shoe cannot tip the offering into a wider discount band is the same kind of check in the other direction.
What is in the earnings
Any valuation struck off an earnings multiple has to state what the earnings contain, and on a tech-adjacent issuer equity-based compensation is the line that decides the answer. If the peers are quoted on estimates struck after that expense and the issuer's metric adds it back, the multiple and the metric sit on two different bases and the resulting enterprise value is wrong in a direction nobody can see. One basis, stated, on both sides of the ratio. Adjusted EBITDA also has to be honest in the other direction: an issuer that adds back a sponsor fee it is about to stop paying, and says nothing about the listed-company costs it is about to start paying, is marketing a number it will never report.
IPO readiness and the critical path
A listing has a queue of work in front of it, and that queue is a critical path rather than a to-do list: only some of it gates a filing. A significant acquisition drags a pre-acquisition audit and pro forma information behind it. A company reporting one segment cannot carry a three-line equity story into a registration statement until segment reporting catches up. Against that, an audit committee that must be fully independent within a year of listing is a post-listing condition, and a sponsor agreement that terminates at closing by its own terms is not work at all. Confusing a post-listing condition with a filing condition spends the sponsor's time on the wrong item, and it is the most common readiness mistake.
What Makes It Hard
The specific traps in this case — the places candidates lose the assessment without noticing.
Check Your Answer
Type the figures you produced and find out how many are right before you open the worked answer. You get a verdict and, where you are off, a pointer to the part of the build to re-check — never the number itself. Everything you type stays on this device.
How to type a figure. Digits, with an optional unit: 1,234.5, $1,234.5, 2.6x, 21.4%. For a negative use (20.0) or -20.0. Enter as many decimals as you carried — precision is never penalised.
What the Case Asked For
The arithmetic is only half of it. Tick off what you actually produced — this half is yours to score, because nothing can grade a written recommendation from a checkbox.
The Model Answer
The worked answer in full: answer deck and Excel model, built the way a banker would actually build them. It is a reference, not a submission — a strong answer under the clock is far shorter.
What the Solution Covers
- —IPO valuation versus trading comps
- —IPO discount and file-range construction
- —Free float, greenshoe and lock-up design
- —Cornerstone and anchor allocation
- —Comparable IPO aftermarket performance
- —Readiness gap assessment
Answer Deck
Full model answer, banker-formatted
Memo
The written recommendation and how it was reached
Upgrade to Diamond
Sign up and upgrade to Diamond to unlock the answer deck, the Excel model and the audio walkthrough.
Get StartedThe Excel Model
The model is linked and tied out end to end — every schedule, every formula and every check, in the file itself.
Downloads are available to Diamond members
Excel Model and PowerPoint Deck and Memo (PDF) and Answer Deck (PDF) — yours to open, edit and rebuild
Walkthrough
A conversational walkthrough of how to approach the case under time pressure — where to start, what to cut, and how the recommendation gets defended.
Audio Walkthrough
How to approach Project Saltmarsh — IPO Readiness & Pricing
60-second preview — upgrade to Diamond for the full walkthrough
Frequently Asked Questions
What is an IPO pricing case study in an equity capital markets interview?
It is a case where you price an offering rather than value a company. The deliverable is a pricing and readiness book and the model behind it: the forward period the offering will be marketed on, where the issuer would trade against the companies it will trade with, what discount an offering of a given size has to concede, how large the offering should be and who sells into it, the file range and the price, and the funds flow, capitalization and ownership that follow. It tests whether you can hold a valuation and a price apart, which is the one thing that makes an offering different from every other valuation exercise, and it appears in ECM groups and at superdays rather than in first-round screens.
How should you allocate 120 minutes across this case?
A working budget that sums to 120: about 20 minutes reading the four documents and screening the raw extract, which includes typing the screened constituents in as you decide what belongs; about 75 minutes at the keyboard on the workbook; and about 25 minutes on the deck's headline pages. The workbook measures 656 fillable cells that collapse to 150 distinct authored formulas, because most blocks are one formula filled right across five structures, two scenario columns or a screen. At half a minute per distinct formula that is 75 minutes exactly, and the cap was set from the clock rather than the other way round. Inside the 75, the offering ladder and the pricing tab are worth more than a proportional share of your attention. They are where the case is decided.
How much of the deck are you actually expected to produce?
A skeleton of headline pages, not a finished book. Nobody produces a full pricing deck in two hours and no interviewer expects one. What is being assessed is whether each page has a two-tier title with the argument in the sub-headline and an actual number in it, whether the hedging conventions are used where they belong, and whether the pages are the right pages: the basis, positioning against the selected companies, the fully distributed valuation, what an offering costs, the size decision, the file range and the price, the funds flow, ownership, and readiness. Spending 40 minutes formatting one page and submitting a workbook with three empty tabs is the most reliable way to fail.
Why is there no discounted cash flow in an IPO case?
Because an initial public offering is priced off where comparable companies trade today, less a discount, and nothing else. A discounted cash flow would not move the file range, no bookrunner strikes one against it, and the investors buying the deal are pricing it against the securities they already own rather than against a terminal value. That has consequences for the whole book: there is no cost of capital to build, so there is no WACC page; there is no terminal assumption to disclose; and there is no football field, because with one methodology and one cross-check a football field is two bars and a decoration. Candidates who bring the M&A toolkit to this case produce pages that look professional and rest on nothing.
What is the difference between the filed range, the offer price and fully distributed value?
Fully distributed value is what the shares should be worth once the offering has seasoned and the market prices the issuer the same way it prices the companies it trades with. The offer price is where the book clears, and it sits below fully distributed value by the IPO discount — investors are being paid to take size in a security with no trading history. The filed range is the band printed in the prospectus, and it is wider than the central case in both directions, because a range that exactly brackets your expectation has nowhere to go when demand is soft. All three are per-share dollar figures within a few dollars of each other, which is exactly why they get conflated, and why every exhibit that quotes one has to say which one it is.
Why does selling more stock not simply raise more money for the company?
Because the discount is a function of the free float and it applies to every share in the deal. Sell more, and the float lands in a worse bucket, and the wider discount is paid on the primary shares as well as the secondary ones, so the company can keep less cash from a larger offering than from a smaller one. On the other side, the pre-IPO holders' retained stake is far larger than the piece they sell and is marked at wherever the stock trades afterwards, which depends on whether the float cleared the level at which index demand becomes available. Put those together and value to the pre-IPO holders peaks somewhere in the middle of the ladder rather than at either end, which is why the structures have to be built and scored rather than reasoned about.
Why are primary and secondary proceeds kept separate in the funds flow?
Because they belong to different people. Primary shares are newly issued and the proceeds go to the company, where they fund the underwriting spread on that tranche, the offering expenses, the payment terminating the sponsor's monitoring agreement, and whatever is left over to repay debt. Secondary shares are sold by existing holders and the proceeds go to those holders; the company never sees them. Putting secondary proceeds into the sources block inflates what the company raised, understates pro forma net leverage because it implies more debt was retired than actually was, and misattributes the dilution. It is the single most common funds-flow error in this archetype and it is entirely avoidable by stating the two tranches on separate exhibits.
What does IPO readiness actually mean here?
It means the work that stands between the company and a public filing, sorted by whether it gates the filing or not. A significant acquisition brings a pre-acquisition audit and pro forma information with it, and that audit is the longest item on this critical path. A company that reports one segment cannot present a three-line equity story in a registration statement until segment reporting catches up, which is the item candidates most often miss because it looks like an accounting detail and is actually the marketing story. Against those, board and committee independence requirements that must be satisfied within a year of listing are post-listing conditions, and a sponsor agreement that terminates at closing by its own terms is not work at all. Total weeks of work exceeds the calendar; it fits only because several items run in parallel, and knowing which ones is the analysis.
About This Equity Capital Markets / IPO Case Study
Equity Capital Markets / IPO case study for investment banking interviews. 120-minute format covering ipo valuation versus trading comps, ipo discount and file-range construction, free float, greenshoe and lock-up design. Includes the full prompt, a model answer deck, a tied-out Excel model and an audio walkthrough.
This case study sits in Investment Banking, under Equity Capital Markets. Every case ships with the full prompt, the supporting materials, a complete model answer and an audio walkthrough of the judgment behind the recommendation.
120-Minute Format
The time limit a real assessment would give you
Answer Deck
Included in the model answer
Excel Model
Included in the model answer
Audio Walkthrough
How to approach the case under time pressure
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