Toast sells shares in IPO at $40, topping range and valuing restaurant-tech company at $20 billion

Restaurant-technology vendor Toast priced its IPO on Tuesday at $40 a share, according to a person familiar with the matter who asked not to be named because the announcement isn’t yet public. The offering was above the expected range and values the company at about $20 billion.

Toast had expected to sell shares at $33 to $36 a piece, after raising the range from $30 to $33. The company will trade on the New York Stock Exchange under ticker symbol “TOST.”

Toast’s IPO comes after a roller-coaster stretch in the pandemic during which revenue initially sank by 80% as restaurants closed and cities across the country shut down. The company slashed half of its workforce in mid-2020 and took desperate measures to stay afloat.

But like other hospitality industry-focused tech companies such as Airbnb and TripActions, the rebound was much swifter than expected. Restaurants stayed open and shifted their business to takeout, delivery and mobile ordering, playing right into Toast’s sweet spot.

Toast initially gave a one-month credit of software fees to its customers and provided free access to its technology that enabled takeout, online ordering and gift card purchases.

By the third quarter of 2020, revenue was increasing again from the prior year. By November the company was experiencing such an upswing that it orchestrated a secondary share sale so that current and former employees could sell up to 25% of their vested shares at a price that valued Toast at $8 billion.

Prior to the Covid-19 pandemic, Toast was thriving by selling technology to restaurants that helped them combine their payment systems with things like inventory management and multilocation controls for eateries with more than one site. Investors valued the company at $5 billion in February 2020.

Toast now says it’s serving more than 48,000 restaurant locations as of the end of June, up from 27,000 in 2019. Annual recurring revenue surged 118% in the second quarter from a year earlier to $494 million. The bulk of Toast’s revenue comes from what the company calls financial technology solutions, consisting primarily of fees paid by customers for payment transactions. Less than 10% comes from subscriptions.