Toast stock jumped 56 percent on its first day on the New York Stock Exchange, when the restaurant technology company priced its IPO over its projected range.
The firm, whose products are used in over 48,000 restaurants, raised $870 million in its first public offering, selling shares at $40 apiece. Toast had previously stated that the offering will be priced between $34 and $36, up from a prior range of $30 to $33.
Toast’s market worth increased to above $31 billion as the stock ended at $62.51.
Toast’s IPO comes at a time when the firm is seeing a rebound after being decimated in the early days of the Covid-19 pandemic when eateries were forced to close and towns throughout the country were shut down. Toast fired half of its employees in April 2020, and CEO Chris Comparato stated in a blog post that restaurant sales had dropped by 80% in most locations the previous month “as a result of required social distance and government-mandated closures.”
Restaurants moved to takeaway and contactless ordering and later opened up to outdoor eating, resulting in a quick turnaround in sales.
Customers were first given a one-month credit on software expenses and free access to Toast’s technology, which allowed for takeout, online ordering, and gift card transactions. By the third quarter, revenue had recovered and was even greater than it had been a year prior, prior to the epidemic.
Revenue for the entire year of 2020 increased by 24% to $823.1 million. Revenue nearly quadrupled to $424.7 million in the second quarter of this year. More than 80% of it comes from financial technology solutions, which largely consist of fees paid by consumers for payment transactions. Hardware, subscription services, and professional services make up the balance of the budget.
Because it relies so heavily on processing fees to generate income, the majority of it is returned to card networks and other payment processors. In the second quarter, Toast’s gross margin, or the revenue remaining after accounting for the cost of goods sold, was 21%, much lower than the average software business. Toast’s net loss grew to $135.5 million in the second quarter, up from $53.7 million a year earlier, as sales and marketing expenditures rose along with research and development spending.
Toast began developing payment technology for restaurants in 2012 in Cambridge, Massachusetts, and eventually built a comprehensive point-of-sale system.
Prior to a pandemic, Toast was flourishing by assisting businesses in integrating their payment systems with inventory management and multilocation controls for restaurants with several locations. In February 2020, the firm was valued at $5 billion by investors.
Following the pandemic’s recovery, the business launched a secondary share sale in November, allowing workers and ex-employees to sell some of their vested stock for an $8 billion valuation.
While investors are enthusiastic about Toast’s expansion, there are still concerns about the restaurant sector, especially as the fast-spreading delta variety continues to ravage vast areas of the country. On Wednesday, Comparato told CNBC’s “Squawk on the Street” that he is hopeful about the future of eateries.
“We believe the industry has been combat tested with the Covid pandemic when it comes to the delta version and Covid in general,” Comparato added. “While Delta may put a damper on things, this sector is on the mend, and we couldn’t be more delighted to lead the charge as the industry rebounds and restaurants begin to prosper once more.”