What happened

Shares of financial technology company Toast (TOST 3.42%) dropped 15.5% in September, according to data provided by S&P Global Market Intelligence. The S&P 500 also went down about 5% during the month, so adverse stock market conditions were likely a factor here. But concerns about Toast's leadership also likely came into play in the minds of investors.

On Sept. 5, Toast announced that Chris Comparato -- its CEO since 2015 -- was being replaced by Aman Narang. Considering Narang was the company's chief operating officer and is additionally a co-founder of the company, I don't believe the market was too concerned about this. 

The real concern was insider selling during September. The more prominent drop for Toast stock occurred after multiple insider transactions were reported on Sept. 19.

So what

Toast provides financial products and services, primarily for companies in the restaurant industry.

According to filings with the Securities and Exchange Commission, Comparato and Principal Accounting Officer James Matlock sold shares of Toast on Sept. 15. Incoming CEO Narang sold shares on Sept. 18. And these transactions were all reported on Sept. 19, which coincides with a more pronounced drop for Toast stock.

Among these three insiders, over 300,000 shares of Toast were sold for just over $6 million total. Over 80% of this was from Narang. Another 19% was from Comparato.

Insider selling isn't necessarily a problem, but it's often interpreted as such by the market. In Toast's case, both the outgoing and the incoming CEO sold shares, which isn't a good look. After all, if those most acquainted with the business sell, then why should retail investors buy?

For Narang, these were founding shares of Toast -- shares that were "acquired" in 2011 when he co-founded the company. After more than a decade, it's reasonable for him to cash out some. Moreover, Narang still holds over 1.1 million shares of Toast. 

Now what

Toast intends to grow by winning over new customers and by offering its customers new products and services. However, CFO Elena Gonzalez recently said that raising its prices was "a key tenet" in its growth plans. 

In July, this key part of Toast's plan appeared to backfire. The company added a $0.99 fee and was quickly forced to rescind it after backlash from its customer base. Shortly thereafter, Jared Isaacman, CEO of competitor Shift4 Payments, said, "We are very appreciative of the fee increase chaos that was recently announced and rescinded by some of our competitors."

According to Isaacman, Shift4's restaurant business is seeing an increase in demand. It's fair to wonder if that's coming at Toast's expense. Therefore, it will be important to watch specific customer metrics when the company reports financial results next.

If Toast is struggling to win new customers or if its spending per customer takes a meaningful drop, it could be related to this issue. And that would cast the recent insider selling in a more negative light.