Private Market Perception vs. Reality: A look at Toast (TOST)

Public market investors are experiencing a new era of volatility in 2022. Historically, getting access to Initial Public Offerings has long been considered a great opportunity, but available for only a select few institutional clients. The Prime Unicorn Index team took a deeper look into the price movement of its underlying component companies that recently went public.  Specifically, we compared each company’s last private equity round (price per share) to their IPO price and first day close price. Interestingly, the share price of the public companies in the Index as of 3/31/2022, is on average 23% higher than the last private financing round price per share. However, if an investor participating in the IPO would be in the negative.

Public market investors are experiencing a new era of volatility in 2022. Historically, getting access to Initial Public Offerings has long been considered a great opportunity, but available for only a select few institutional clients. The Prime Unicorn Index team took a deeper look into the price movement of its underlying component companies that recently went public.  Specifically, we compared each company’s last private equity round (price per share) to their IPO price and first day close price. Interestingly, the share price of the public companies in the Index as of 3/31/2022, is on average 23% higher than the last private financing round price per share. However, if an investor participating in the IPO would be in the negative.

Toast, Inc. is a great example. They are an all-in-one point-of-sale and restaurant management platform that started raising VC money in 2013. After raising almost $850 million in 8 years, Toast saw its private market valuation escalate to $4.8 billion (as of their Series F), before its IPO. Had an investor participated in the Series F round (a price per share of $9.08) they would have gained 340% and 588% at IPO price and first close price, respectively.

As of the end of Q1 2022 you would still be up 139%, however if you got in at IPO you would be in the negative.  In fact, from IPO on September 22, 2021 until the end of Q1 2022, the loss would have been (-58.80)%.  If you have held the NASDAQ over the same period, the loss would have been (-5%).

Furthermore, had you held a basket of private stocks, such as is represented in the benchmark Prime Unicorn Index, you would have been down (-8.1%).

From the analysis, pre-IPO would be a better investment strategy than waiting for the Initial Public Offering. The data in the charts below clearly prove investing in the last round prior to IPO would have been much more lucrative than waiting until IPO to put capital to work.

The Prime Unicorn Index is currently tracking 144 companies with valuations of $1 billion or more to be considered into the index. Components must be headquartered in the U.S. and be privately held. For more information on the Prime Unicorn Index, please visit primeunicornindex.com.

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