As shares of Canadian cannabis producer Tilray continued their wild bout of trading on Thursday, CNBC's doubled down on his declaration that investors are getting carried away with their enthusiasm around pot stocks.
"This whole group has gotten too hot — no argument here," he said. "Is it a bubble? Absolutely."
"People are too excited right now," the "Mad Money" host continued. "It will end badly when the stock market gets flooded with cannabis stocks. I just don't expect it to end quite yet."
Tilray's surge higher came after the company's CEO, Brendan Kennedy, appeared on "Mad Money" on Tuesday, the same day Tilray received approval from the Drug Enforcement Administration to import cannabis to the United States for medical research.
In the interview, Kennedy told Cramer that pharmaceutical and alcohol companies should invest in cannabis as a "hedge" against the inevitable rise of the industry. The CEO pegged the total addressable market for medical marijuana at around $150 billion.
That set off a 90 percent intraday gain in Tilray's stock on Wednesday, with shares eventually closing up 38.1 percent. On Thursday, the volatile ride continued, rising 14 percent in early trading before plunging 22 percent.
Tilray's stock ended Thursday's trading session down 17.62 percent, at $176.35 a share. The stock continued to decline in after-hours trading.
Even so, "Tilray's not the culprit here," Cramer said on Thursday. "When I had CEO Brendan Kennedy on the show two nights ago and I used a $500 billion projection, ... Kennedy didn't endorse it."
The $500 billion estimate came from Brian Athaide, a Procter & Gamble vet who now runs cannabis cultivator Green Organic Dutchman. Cramer admitted he got it from a "reluctant" Athaide at a recent conference when the two spoke about the market potential for oil, pharmaceutical, pet health, edible and drinkable weed products.
"Again, Brendan Kennedy did not endorse that pie-in-the-sky number. He was much more conservative," the "Mad Money" host said.
And while he acknowledged Tilray's various advantages in the cannabis space, including its partnership with Novartis and the green light from the DEA, Cramer again issued a warning to investors about its need for capital.
"Kennedy also admitted that he needed more capital to keep up with demand. He pretty much told you Tilray will have to raise money, and the company selling stock through a secondary offering certainly seems like the most logical and obvious choice to me," Cramer said. "That was a reason for me to tell you to sell the stock, not buy it."
But the problem is the ongoing battle between the short and long positions in shares of Tilray, which have seen notably higher trading volume in the last several days.
"The simple fact is this is one gigantic short squeeze, where there aren't enough shares for shorts to borrow and sell — remember, you can't sell a stock you don't own," Cramer said. "So when regular investors decide they want to own a piece of a company like Tilray, the market just can't handle it. The stock explodes higher."
"Here's where I come down: you need to stay away from the stock of Tilray right now," he advised. "You don't know when they'll offer more stock. You don't know when the battle between the shorts and the longs will be finished. Tilray and many of its compatriots are simply too risky for me to recommend and too thinly traded to be worth betting on."
At the same time, Cramer maintained that Tilray, a recognized leader in its space, didn't create the problem, adding that until more marijuana plays came to the public market, the craze could continue.
"Yes, these stocks are in a bubble, but no, it's not a joke. Tilray and its peers are going to disrupt a host of different industries. I think the boom here is very real, it just might not be as investable at the moment as you'd like," he said.