Toast looks toward $18B valuation in upcoming IPO

As if the Boston startup market needed additional momentum, it appears restaurant software startup Toast will dramatically bolster its valuation in its upcoming IPO.

For a city perhaps best known internationally for its hard tech and biotech efforts, to see Toast not only rebound from its early-pandemic layoffs to a public debut, but to target a valuation closer to $20 billion than $10 billion, is a coup.

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In a new S-1/A filing this morning, Toast indicated an early IPO range of between $30 and $33 per share, leading to a maximum fundraise of $825 million in its IPO. The company was last valued at $4.9 billion in early 2020, when Toast raised $400 million. The company is set to dramatically supersede that valuation mark thanks to expanding revenues and an especially strong second quarter.

Let’s dig into the company’s new IPO price range, calculate simple and fully diluted results, and see what we can learn from where Toast may price. Recall that the company has a mix of recurring software (SaaS) incomes as well as fintech revenue (payments, mostly). Its revenue mix is interesting, and how Toast prices could help us better understand how to value vertical SaaS startups that are pursuing a payments-and-SaaS business approach.

Into the filing!

Toast is selling 21,739,131 Class A shares in its IPO. They get one vote. Class B shares get 10. If you were considering buying into Toast’s IPO in hopes of having a say in its future, don’t. You won’t. The company’s IPO is really a method by which public-market investors can endorse the company’s current management group — or decline to buy any ownership at all.

Regardless of how we feel about corporate governance structures designed to eliminate the influence of common shareholders, Toast will have 499,332,681 shares outstanding after its IPO, or 502,593,550 if its underwriters choose to purchase their allotted greenshoe option.

At the company’s expected IPO price range of $30 to $33 per share, Toast is worth $14.98 billion at the low end, and $16.48 billion at the top. Inclusive of shares from its underwriters’ option, Toast’s simple IPO valuation range expands from $15.08 billion at the bottom to $16.59 billion at the top.