Mad Money

Cramer dreading Alibaba IPO ‘like the plague’

Cramer on Alibaba: Wrong time, wrong biz, wrong cohort

(Click for video linked to a searchable transcript of this Mad Money segment)

It could be the biggest events on Wall Street this year. So why does it give Jim Cramer a terrible sinking feeling?

The event is the IPO of China-based e-commerce giant Alibaba. The much anticipated offering could be one of the biggest IPO's ever; it's widely expected to surpass Facebook, which raised $16.4 billion in 2012.

Some investors view developments as a sign that growth is percolating in China, and if China is the engine of the global economy, they say events couldn't be more bullish.

Jim Cramer, however, doesn't see it that way. Not at all.

Alibaba Group headquarters in Hangzhou, China
Hong Wu | Getty Images

"The last thing this market needs is an initial public offering from Alibaba," Cramer said. "I have to wonder if the Alibaba IPO wasn't put on Earth to be sure that this now broken bull market in technology and e-commerce not only dies but stays dead."

Cramer knows his outlook may seem counterintuitive. After all, the Alibaba metrics are astounding.

" receives 11.3 billion in annual orders from 231 million buyers including 136 million mobile monthly average users in the still very undeveloped retail market in China. There's 57% revenue growth, which seems to be accelerating as more and more Chinese get on the internet and go mobile."

The positives go on and on.

And for that reason Cramer believe Alibaba will attract buyers of all shapes and sizes, everyone from big money pros to individuals hoping to grab a piece of the next big thing.

The problem, he says, is where does all the money come from?

"The answer: from Facebook, from Amazon, from eBay, from Google and from the rest of the cohort," Cramer said.

And that's a big problem.

With the tech sector already facing serious headwinds, Cramer worries that a significant rotation from the marquis stocks listed above and into Alibaba may be more than the market can handle.

"You have to view Alibaba as one gigantic magnet that will suck out capital from all over the place. I just done see enough freed up money in the entire market place for this one," Cramer said.

In addition, Cramer says there will be other problems.

"Yahoo owns 40% of the company and it has stated that it wants to be a seller of its stock so it can expand its own business and buyback stock of its own with the proceeds," Cramer explained.

Also, Cramer says valuations will be based, in part, on future growth potential but growth potential may be next to impossible to quantify. In addition, he believes a slew of market skeptics will say a Chinese Internet IPO has to mark the top, simply due to the exuberance.

All told, Cramer thinks the IPO will generate serious selling pressure not only in tech but potentially in far corners of the market.

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And considering the market is already struggling with serious headwinds including geo-political issues, a rotation out of growth, and weakness in big bank stocks, he worries that the Alibaba IPO may send the market over the edge.

"Therefore I am dreading this deal like a Chinese plague. You should, too, " Cramer said. "I am not a fan of sell in May and go away. If it didn't rhyme I don't know if people would even say it. But I could be a fan of sell in front of Alibaba and go away. Yes, that's how concerned I am about this deal and its consequences for the entire stock market."

Call Cramer: 1-800-743-CNBC

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