Once a mysterious crisis in a far-off land, when the COVID-19 pandemic began breaching our borders, common sense shuddered at the stark inevitability. Social distancing became a top priority when scientists discovered that the SARS-CoV-2 virus could be spread by breathing contaminated air particles. To get ahead of the infection curve, government bodies across the globe imposed draconian mitigation measures.
While these early actions may have saved countless lives, the understandable decision caused unprecedented devastation to multiple physical retailers. Among the worst-hit sufferers was the high-traffic-dependent restaurant sector, forcing many small business owners to take drastic, heart-wrenching measures.
As society rang in the new year, many companies in the food-and-beverage industry began picking up the pieces, which were numerous. According to a sector-specific study, more than 10% of U.S.-based restaurants shut their doors permanently. Yet in the middle of this crisis, hope came in the form of an initial public offering (IPO).
Toast — a technology-driven, cloud-based software platform geared toward driving efficiencies in the restaurant industry — will test the resilience of the American consumer market. If you’re confident, you can reserve a seat in this potentially transformative narrative.
When is the Toast IPO Date?
One of the most anticipated listings on the IPO calendar, Toast is set to make its debut on September 22, 2021. Per its prospectus with the U.S. Securities and Exchange Commission (SEC), the software firm’s Class A common shares will trade on the New York Stock Exchange under the ticker symbol TOST.
Initially, Toast planned to raise $685 million in its public market unveiling through the offering of 21.7 million shares at a price range between $30 and $33 per unit. At the midpoint of this spectrum, the restaurant-centric tech company would enjoy a fully diluted market value of $17.9 billion. Later, based on management’s amended Form S-1, Toast declared its intention to raise $825 million. While the price-per-share would stay the same, the shares offered increased to 25 million.
Financial heavyweights Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), JPMorgan Chase (NYSE: JPM), Piper Sandler (NYSE: PIPR), William Blair and KeyBanc Capital Markets — which is under KeyCorp (NYSE: KEY) — are joint bookrunners for this offering.
In an IPO market flooded by business combinations with special purpose acquisition companies (SPACs), Toast is comparatively distinct, electing to go the traditional route. For many investors — particularly those with a more conservative risk-tolerance profile — this small but not insignificant fact could help solidify a decision on TOST stock.
For one thing, despite generating tremendous buzz, post-merger SPACs have generally not lived up to expectations, underperforming benchmark indices so far this year. More importantly, though, SPACs tend to be dilutive vehicles, with many examples hurting rookie investors because of their lack of knowledge regarding the finer details of business combinations.
Specifically for TOST stock, the more intensive regulatory scrutiny toward traditional IPOs represents an organic marketing point. Since betting on the restaurant industry is a risky endeavor, prospective buyers of this new offering will appreciate the stronger vetting process that preceded it.
Toast Financial History
At the onset of the COVID-19 pandemic, the circumstances surrounding the broader food-services industry couldn’t have looked any bleaker. With government authorities clamping down on any movement not necessary for survival, the country experienced an unprecedented societal and economic paradigm shift. Most notably, the personal savings rate jumped to 33.8% in April 2020 from 8.3% in February of the same year as money literally stayed home.
But the same deflationary trend in spending activities also benefited individual household budgets. As the public health crisis expanded from weeks into months, many American consumers found themselves sitting on a mountain of cash. Add in a massive influx of unemployment benefits and bipartisan-supported stimulus checks and many folks — especially white-collar workers — experienced a mini fiscal boom.
Under the concept of retail revenge — or the desire to consume goods and services in a bid to make up for time lost in quarantine — Americans greeted the gradual reopening of the nation with wide-open wallets. As a result, Toast’s financials didn’t suffer like other retail-centric companies did. In fact, total revenue for 2020 was $823.1 million, up nearly 24% from 2019’s tally of $665 million.
Breaking it down, most revenue subsegments experienced robust year-over-year growth:
- Subscription services: $101.4 million (up 62%)
- Financial technology solutions: $644.4 million (up 21%)
- Hardware: $64 million (up 16%)
- Professional services: $13.4 million (down 15%)
Encouragingly for TOST stock, as the COVID-19 pandemic worsened, most entrepreneurs were unwilling to go down without a fight. Instead, they turned to innovative cloud-based solutions like what Toast offers. Further, that the company’s subscription and financial technology solutions saw the most percentage-wise and nominal growth, respectively, speaks to the relevance of the underlying platform.
Extracting efficiencies and higher spend per customer isn’t just a marketing gimmick: the proof really is in the pudding.
Although the narrative for TOST stock is exceptionally enticing, the bullish thesis depends heavily on consumer sentiment and the sustained momentum that the restaurant industry has achieved since the March doldrums of 2020. Obviously, any negative impact to this trajectory could hurt Toast’s upside potential.
At the same time, consumer sentiment has been the one bright spot in an otherwise dour period for those in the eatery business. According to economic data from the U.S. Census Bureau, retail sales in the restaurant industry experienced one of the most extraordinary recoveries in recent memory. Between February through July of this year, sector revenue jumped a mesmerizing 50%.
Most likely, a direct correlation exists between the COVID vaccination rollout and the surge in sales at eating establishments. Should that continue, more restaurateurs are likely to take advantage of Toast’s point-of-sale and management system solutions in a bid to maximize their revenue-making opportunities. In turn, burgeoning sector confidence should help lift TOST stock.
How to Buy Toast IPO (TOST) Stock
As a traditional IPO, prospective retail buyers have the advantage of a more comprehensive vetting process than compared to a SPAC business combination. However, the drawback is that for most investors, you’ll have to acquire shares at the open. Unfortunately, financial underwriters dole out new issues to their choicest clients (institutional investors), boxing out the little guys and gals.
However, IPOs aren’t guaranteed to swing higher on opening day. Moreover, the process of participating on the open market is easy if you already know how to buy stocks. But if not, follow the steps below.
Step 1: Pick a brokerage.
For those who want to develop their investing acumen with new issues, you should narrow your choice of best brokers to platforms that offer you select pre-IPO access (or access to shares at their initial offering price).
Step 2: Decide how many shares you want.
No matter the underlying IPO process, new issues are always risky due to their lack of track record in the market. Therefore, choose a balanced share count that can reward you but will also limit downside exposure.
Step 3: Choose your order type.
Before placing your first order, acquaint yourself with these market concepts.
- Bid: The buyer’s best offer for a particular stock.
- Ask: The seller’s lowest acceptable price.
- Spread: Primarily the difference between the bid-ask price, the spread is also the rate of profitability for the market maker. Narrower spreads are less profitable for the market maker but in turn are also less risky. Wider spreads feature a higher risk profile and therefore, the market maker requires a greater profit to accommodate the trade.
- Limit order: Buy or sell requests at a specific price, limit orders provide transparency but no execution guarantees. Therefore, it’s possible for your limit order to hang unfulfilled.
- Market order: Market orders guarantee fulfillment but only at the prevailing and therefore least desirable rate (i.e., buy orders filled on the ask, sells on the bid).
- Stop-loss order: A self-protective mechanism for your portfolio, stop-loss orders automatically exit your position at either a predetermined price or anything lower.
- Stop-limit order: Stop-limit orders are likewise defensive tools but only execute (exit) at a predetermined price. However, such orders carry the same non-fulfillment risk as limit orders.
Step 4: Execute your trade.
To execute a market order, follow these steps:
- Select your action type (buy or sell).
- Enter the shares you want to acquire (or sell).
- Hit the Buy (or Sell) button.
Follow the same sequence for limit orders (but include your execution price).
TOST Restrictions for Retail Investors
Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons if you believe you may have a conflict of interest regarding an IPO. Securities laws hand down harsh penalties for those profiteering from privileged information. Therefore, it’s better to be safe than sorry.
In almost all cases, underwriters keep out retail investors in traditional IPOs because they are simply not profitable enough. However, companies like ClickIPO democratize such deals by acquiring select pre-IPO shares for the end purpose of distribution to its members. Serious IPO participants should consider opening an account.
An IPO to Dine in or to Go
Potentially, the Toast IPO has something for everyone. For short-term day traders, TOST stock can jump higher on the retail revenge narrative. For the buy-and-hold types, government data shows that the restaurant industry is resilient. If you can handle possible incoming volatility, the point-of-sale solutions provider could craft a delectable concoction for your portfolio.