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Never follow the hoofbeats of the herd

Matein Khalid

The Toast (TOST) IPO will be a spectacular winner on Nasdaq when the restaurant software unicorn finally reaches its endgame as a private business. TOST will be the hottest IPO to come out of Bean Town since Boston Chicken or even Amgen.

Investors in the Gulf who loaded up on TOST in the pre-IPO market at a $8 billion valuation will, I predict, have a 3X payday when TOST breaks syndicate on its $100 million conventional listing IPO.

TOST’s point of sales software is already ubiquitous in 50,000 restaurants, cafes and bars that process a staggering $38 billion in payment volumes.

If I am right and TOST trades in the aftermarket at $24 billion, I would not advise my friends in the UAE to buy the shares just after the IPO as its valuation metric would be way too high at 26X booked revenues and cash break even nowhere near in sight.

After all, TOST was valued at a mere $5 billion in its Series F funding round in February 2020 but I was too unnerved by the pandemic to take a deep dive on the unicorn or pull the trigger while the markets were dropping like a yo-yo. Yet I know a super connected Aussie friend with whom I discussed memories of Shane Warne and Dennis Lillee definitely accumulated TOST in his fund, one reason why his lucky investors are smiling all the way to the bank with the 69% IRR he gifted them.

A new rule of Mattinomics, never follow the hoofbeats of the herd but always track the footsteps of the smart money in Silicon Valley in the quest for tech unicorn paydirt. In this case, I have to go no further than my friend the Wizard of Oz plus the VC team at Bessemer, Tiger Global and TPG. The pandemic has made it problematic to fly from Dubai to San Fran and compulsive Zoom chats do not compensate for market intel dinners at Spagos or Atelier Crenn where the chef Dominique Crenn was the first women in the US to achieve 3 Michelin stars, a culinary equivalent of an Olympic gold medal.

The pandemic trauma for the world’s restaurants is not over and TOST’s contactless payment solutions will be a secular growth theme as the Wuhan virus continues to mutate and afflict the human race for the rest of our lifetimes.

Matein Khalid is Chief Investment Officer with Asas Capital

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