Cramer: Snowflake IPO double reveals 'very little discipline' in market and 'does not bode well'

Published Thu, Sep 17 20209:20 AM EDTUpdated Thu, Sep 17 202011:11 AM EDT

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

CNBC's Jim Cramer said Thursday he sees Snowflake 's price doubling on its first day of trading as concerning for the stock market, which has soared in recent months after the coronavirus-driven sell-off earlier this year. "I think that the amount of money that the institutions had to spend to be able to get their second half of Snowflake after they get their first part on the IPO shows that there is very little discipline," Cramer said on "Squawk Box." Snowflake was giving back as much as 14% in early trading Thursday, one day after the largest-ever software IPO more than doubled from its offering price of $120 per share. Shares of Snowflake, a provider of cloud-based data storage and analysis software, began trading Wednesday at $245 each and closed at $253.93. By late morning Thursday, it was off 6% from Wednesday's closing price. Cramer said Wednesday's price action valued the company at more than 100 times sales, which he found worrisome. The "Mad Money" host said he believes in Snowflake's CEO, Frank Slootman, a veteran in Silicon Valley, "but 100 times is just asking too much for any one company and shows that the price discipline for buyers is nil, and that does not bode well." Snowflake's IPO came as multiple other tech companies are planning to go public, such as data analytics firm Palantir . Cramer said the frenzied debut for Snowflake could motivate additional companies to follow suit. "These institutions have lost discipline. Get ready. There are going to be so many deals as everyone out in the Valley is going to say, 'You know what, they're giving money away. We've got to get some,'" he said. "This is a true struggle for the bull market because supply can easily, easily, tamp demand when it just gives too aggressive." Cramer said he believes the rush out of the gate to buy Snowflake's stock was not driven by retail investors. "This is actually the professionals. The professionals know Frank Slootman from what he did at ServiceNow , and the professionals know the cloud." "The fact that they didn't just say, 'You know what, we are going to let this one pass after we got our initial allocation,' shows me that they just will just pay anything," Cramer added.

Jim Cramer

Scott Mlyn | CNBC

"I think that the amount of money that the institutions had to spend to be able to get their second half of Snowflake after they get their first part on the IPO shows that there is very little discipline," Cramer said on "Squawk Box."