U.S. technology unicorn Toast filed a new S-1 document this morning detailing a higher IPO price range for its shares. The more expensive range indicates that Toast may be worth more in its debut than it initially expected, a bullish sign for technology companies more broadly.
Toast’s rising valuation may provide a boon to two different sub-sectors of technology: software and fintech. The restaurant-focused Toast sells software on a recurring basis (SaaS) to restaurants while also providing financial technology solutions. And while it is best known as a software company that dabbles in hardware, Boston-based Toast generates the bulk of its aggregate top line from financial services.
Software revenues are valuable thanks to their high margins and recurring structure. Toast’s financial-services revenues, by contrast, are largely transaction-based and sport lower gross margins. The company’s IPO price, then, could help the private markets more fairly price startups offering their own blend of software-and-fintech incomes.
The so-called “vertical SaaS” model, in which startups build software tailored to one particular industry or another, has become a somewhat two-part business effort; many startups today are pursuing both the sale of software along with fintech revenues. Toast’s IPO, then, could operate as a bellwether of sorts for a host of startups.
To see Toast raise its range, therefore, got our eyebrows up. Let’s talk money.
Toast’s new IPO range
From a previous range of $30 to $33, Toast now expects to price its IPO between $34 and $36.
Toast now expects its IPO price to clear its previous upper-end guidance at the low end of its new range. That’s bullish — and indicative of a thus-far receptive market for the company’s equity.
,Toast will have to post pretty damn strong growth numbers for it to keep its multiple up. But the market appears willing to take that risk.