Olo Stock IPO: What You Need to Know
Online ordering and food delivery is here to stay, and Olo wants to offer restaurants another solution.
On-demand restaurant software platform Olo (NYSE: OLO) hit the public markets today after pricing its initial public offering (IPO) yesterday evening.
The stock is trading under the symbol “OLO” and trading kicked off at noon. Within 10 minutes its share price rose to $31 per share, well above its offering price of $25. The IPO market has been hot in recent months, with many debuts sprinting out of the gate relative to the offering price.
Here’s what you need to know about Olo’s IPO.
The Numbers Behind Olo’s IPO
The company operates a cloud-based software-as-a-service (SaaS) platform that makes it easy for restaurants to set up shop online, handling everything from ordering to delivery to managing its offerings across other third-party platforms.
Olo has three core segments (which it refers to as “modules”): Ordering, Dispatch, and Rails. Ordering uses a subscription-based model that charges restaurants a monthly subscription fee to process customer orders across various channels such as mobile or the web.
The Dispatch and Rails modules generate transaction-based revenue, with Dispatch being a delivery fulfillment service while Rails lets the restaurant manage menu, pricing, and location information across channels and integrates orders from third-party aggregators into the restaurant’s point-of-sale (POS) system.
The company was founded in 2005 by Twitter (NYSE: TWTR) co-founder Noah Glass, who currently serves as Olo’s CEO, and is based out of New York City. There are now 64,000 restaurants using the platform, processing 1.8 million orders per day.
In 2020, Olo generated $14.6 billion in gross merchandise volume (GMV). Net revenue retention, a metric that measures how well SaaS companies expand relationships with existing customers, has been above 120% since early 2018.
Revenue growth has also been impressive, with total sales jumping 94% in 2020 to reach $98.4 million. Unlike many tech startups that are going public, Olo is already profitable, generating over $3 million in net income last year.
The COVID-19 pandemic expectedly drove demand for Olo’s platform last year, as many restaurants scrambled to adopt digital services to survive.
Olo’s Stock Price Points to a $4 Billion-Plus Valuation
As noted earlier, the IPO priced at $25 per share, above the expected range of $20 to $22. Olo sold 18 million Class A shares at that price, raising $450 million in fresh capital that it can use to fund future growth.
Investors should also keep in mind that Olo’s capital structure includes supervoting Class B shares that get ten votes per share, as opposed to the one vote per share that Class A shares are entitled to.
Class B shares are predominantly held by insiders in order to maintain voting power — specifically, Class B shareholders will wield 99% voting power combined. This is a common structure for many modern tech companies.
Based on the 142 million shares that will be outstanding after the IPO, Olo is already commanding a total market cap of $4.4 billion based on a $31 share price.
Wrapping Up: Why Olo Stock Could be a Buy
The pandemic catalyzed a wholesale shift to online ordering and food delivery for both restaurants and consumers alike, which has been a boon to companies like DoorDash (NYSE: DASH) and GrubHub (NYSE: GRUB).
Olo is stepping into a competitive market to offer an alternative to those leading platforms, which are often criticized for hefty commission rates.
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