Markets

'Just say no to IPO' — Cramer says new offerings are a bigger threat to the market than China

Key Points
  • CNBC's Jim Cramer says that too many initial public offerings coming to Wall Street pose a greater risk to the stock market than the U.S.-China trade war.
  • Many companies with billion-dollar-plus valuations at the time of their 2019 IPOs got cool receptions on Wall Street.
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Cramer: Just say no to IPO

CNBC's Jim Cramer said Monday that too many initial public offerings coming to Wall Street pose a greater risk to the stock market than the U.S.-China trade war.

"Just say no to IPO," Cramer said on "Squawk on the Street." "The market can't handle another IPO. There's just no money around."

Earlier Monday morning, the "Mad Money" host tweeted that IPO oversupply is a "bigger threat to the U.S. markets than China." High-level trade negotiations resume in Washington later this week, with reports that Beijing may want to narrow the scope of the negotiations.

It's classic economics: The higher the supply (more shares), the lower the price. And it doesn't help that many of these new stocks are getting cool receptions on Wall Street after billion-dollar-plus private valuations fail to hold up under public market scrutiny — count shares of Lyft, Uber and Peloton among them.

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IPOs in 2019 are struggling — Four experts on what to watch now

WeWork felt the wrath of potential public investors — enduring weeks of negative news on concerns about slashed valuations, confusing corporate governance, and a more than $900 million loss for the first six months of 2019, before pulling its IPO last week.

Earlier Monday, former Nasdaq CEO Bob Greifeld warned on CNBC that this year's IPO climate feels similar to the late 1990s dot-com bubble.

"In a sense, it reminded me back of the dot-com era, when you had companies going public that had no known path to profitability," said Greifeld, chairman of high-speed computerized trading firm Virtu Financial.

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Key Points
  • Former Nasdaq CEO Bob Greifeld warns that this year's IPO boom feels similar to the late 1990s tech bubble.
  • "In a sense, it reminded me back of the dot-com era, when you had companies going public that had no known path to profitability," he says.
  • "We shouldn't be sounding great alarm bells" about IPOs, Greifeld says, but he adds that "post-WeWork, if you don't have a path to profitability, you're going to need that."