The restaurant software is targeting an IPO valuation of $16.5 billion, but is it a good investment and when can I buy shares in Toast?
Sept. 20, 2021
On Monday, Toast announced its intention to go public via an Initial Public Offering (IPO). In our technology-driven world, anything that makes businesses’ lives easier has the potential to make a lot of money. With the hospitality industry being one of the most hectic sectors in our economy, as employees are quite literally always on their feet, the restaurant space was a great place for Toast to target.
So, is the up-and-coming IPO a good investment? Let’s take a look.
What is Toast?
Headquartered in Boston, Toast is a cloud-based restaurant software firm. The company offers restaurant management and point of sale systems for Google’s Android. Founded in 2012, Toast sets out to “improve operations, increase sales and create a better guest experience.”
When can I buy Toast stock?
Toast is expected to go public this week on Wednesday, 22 September under the ticker ‘TOST’.
When it does make its stock market debut, Toast said that it is going to sell 21.7 million Class A shares between $30 to $33 apiece. When sold at that price, this would value Toast’s IPO somewhere between $652 million to $717 million.
After the offering, the firm would still have 21.74 million Class A shares and 477.6 million Class B shares outstanding.
Let’s look at the books.
For the first six months of 2021, Toast reported a net loss of $234.7 million, compared to a loss of $124.6 million in the year-ago period. In the same time period, sales reached $703.8 million, which was more than double the $343.8 million it recorded a year earlier.
On the customer front, Toast has around 48,000 restaurants using its services. At the end of June, Toast had also processed $38 billion in gross transactions over the previous year and averaged 5.5 million restaurant/customer orders per day in June.
The company has been busy fundraising. In February of 2020, Toast received funding of $400 million. This investment round was run by investment firms Bessemer Venture Partners, TPG, Tiger Global Management, and Greenoaks Capital. This round valued Toast at a whopping $4.9 billion.
Toasts’ growth potential
Given that there are over 1 million restaurants in the U.S., and Toast has only captured 48,000, the company still has a huge addressable market to reach. In addition, Toast has the opportunity to bring its high-tech software internationally as there is a massive market overseas of restaurants that could also use its services.
The company also seems to have a passion for helping the smaller guy keep up in our ever-changing digital world. Straight from the horse mouth, Toast said in its SEC filing:
“Running a restaurant is tough. It takes guts and determination to be in this business,” adding “We started Toast to make restaurant work a little easier. Back in 2011, we hoped to take our passion for small business and build a technology platform for an industry that wasn’t benefiting from the digital innovation other industries were experiencing.”
However, Toast is not alone in its goals. Toast’s rivals include; Upserve, TouchBistro Restaurant POS, and industry leader Square Point of Sale. The latter, Square (NYSE: SQ), has extensive experience in the financial service industry and could represent a massive hurdle for Toast.
With a solid business plan, plus the opportunity to disrupt a recovering industry, this might just be a stock to watch when it IPOs. However, it wouldn’t really be like MyWallSt if we didn’t warn you that it’s probably best to wait until a company reports at least two earnings reports as a publicly-traded company before investing in it.
Instead of investing in newly-listed companies, why not check out our shortlist of stocks that are well-established in their industries but still have the opportunity to give their shareholders unrivaled returns? Start your MyWallSt free access now.