Jim Cramer said buyers of Toast TOST are likely to get burned by initial prices, despite a promising sector and a spectacular first day of trading, that saw shares rise 56%.
In the "Know Your IPO" segment of a recent "Mad Money" episode, Cramer said he loves the restaurant technology space. Apparently so does Wall Street, with shares of Square (SQ) - Get Square, Inc. Class A Report, Lightspeed LSPD and Par Technology Corp. (PAR) - Get PAR Technology Corporation Report all seeing big gains. Toast is another player, with 29,000 customers using its integrated platform that provides everything from online ordering, to delivery, to point-of-sale technology. The only problem? There are a lot of other companies that do exactly what Toast does.
But Cramer said that alone wouldn't turn him away from the stock. What would is the company's sky-high valuation that has shares trading at 19 times sales. That means Toast is priced for perfection and investors are likely to get a little scorched. Find out more about Real Money columnists' investing ideas here.
Cramer said he's also not a fan of this "sliver deal," which sold only five million shares of the Toast's 500-million-share float. With tiered lockup expirations coming down the pike, there is likely to be a lot of selling pressure in the near future.
At lower levels, Cramer said he'd be a buyer of Toast, but at these prices, he simply cannot recommend it.
Toast is a cloud-based restaurant software company, which helps restaurants with online ordering.
Headquartered in Boston, Mass., the company was founded by Aman Narang, Jon Grimm, and Steve Fredette.