LinkedIn shares more than doubled in its public trading debut on Thursday, leading Cramer to call it the "most outrageously overvalued, ridiculous thing" he's seen in years.
Shares of the online professional social networking company soared by as much as 171 percent in afternoon trading — far exceeding the $45 IPO price. In turn, the company's valuation has reached as high as $11 billion while just a few weeks ago, LinkedIn proposed a price range for the IPO that valued it at just over $3 billion.
Cramer said the problem with LinkedIn's IPO is that it offered just a "little sliver" of its stock. That "little taste" got the market stimulated, sending the stock price higher, as investors had long been hungry for anything social media-related on the Web. Being as LinkedIn is the first prominent U.S. social networking company to go public, investors were quick to pull the trigger.
Cramer thinks "sliver deals" are wrong, going so far as to call LinkedIn's pricing "preposterous." He said it sends the stock way up, but it can't stay there forever, of course. He thinks it's the "wrong" way to price and said the U.S. government shouldn't allow it.
If LinkedIn's IPO does end up badly, CNBC's Amanda Drury asked if it wouldn't bring other Web-based companies' sky-high valuations "back down to earth." She was referring to Facebook and Twitter, for example. Cramer said those valuations aren't likely to fall until after the secondary stock offerings. He said secondary stock offerings were mainly to blame for the dot-com bomb of 1999.
To Cramer, LinkedIn's pricing evoked memories of the dot-com boom of the late 1990s. During that time, he said 300 companies went public, including TheStreet.com , where he's founder and chairman. Despite his wishes, he said Goldman priced TheStreet using a "sliver deal." He said his company's stock skyrocketed, only to fall back down. Of course, TheStreet.com is one of just a few companies that survived the dot-com bomb, but he said the pricing made it really difficult.
—Reuters contributed to this report
Call Cramer: 1-800-743-CNBC
Questions for Cramer? firstname.lastname@example.org
Questions, comments, suggestions for the Mad Money website? email@example.com