Tom Lee says hot IPOs may be a sign retail investors are coming back to stocks

Published Thu, Jan 14 20216:00 PM EST

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

(This story is for CNBC Pro subscribers only.) Fundstrat Global Advisors co-founder Tom Lee told CNBC on Thursday the string of soaring public market debuts may be a sign that retail investors are continuing to pile into equities. Lee's comments came shortly after Petco Health and Wellness finished its first day of trading up more than 60% with a market capitalization north of $6 billion. "It does show a lot of enthusiasm, and part of me says that's a little alarming," Lee said on "Closing Bell." However, Lee, who also serves as the firm's head of research, said the strength of Petco's debut and other recent IPOs must take into consideration retail investor behavior over the last decade. "For the last 10 years, households saved $3 trillion, 94% of it went into bonds. Barely any money went into the stock market," Lee said. He added, "I think the world is pretty grossly underweight stocks." Additionally, the number of publicly traded companies has declined over that time frame, Lee said, shrinking the pool of available stocks to buy at a moment where a flood of new investors are entering the market . "I think there is a shortage of equity and if investors are coming back into stocks, one of the more convenient ways is to buy IPOs," said Lee, a former chief equity strategist at JPMorgan. "This could be ... just more of a sign of regime change where the equity culture is coming back." Indeed, last month, CNBC's Jim Cramer said the fresh-faced stock buyers who arose during the coronavirus pandemic "changed the entire character of the market." Some people on Wall Street, including Goldman Sachs Chairman and CEO David Solomon, see the retail demand for IPOs as a worrying sign for the market. "I do think we're in a moment in time where there's a lot of euphoria. I personally am concerned about that," Solomon told CNBC in December , less than a week after the first-day pops of DoorDash and Airbnb . "I don't think in the long run that's healthy," Solomon said. "I think it will rebalance over time, as it always does." Disclaimer

Petco Health and Wellness Co. signage outside the Nasdaq MarketSite during the company's initial public offering (IPO) in New York, U.S., on Thursday, Jan. 14, 2021.

Michael Nagle | Bloomberg | Getty Images

(This story is for CNBC Pro subscribers only.)

Fundstrat Global Advisors co-founder Tom Lee told CNBC on Thursday the string of soaring public market debuts may be a sign that retail investors are continuing to pile into equities.

Lee's comments came shortly after Petco Health and Wellness finished its first day of trading up more than 60% with a market capitalization north of $6 billion. "It does show a lot of enthusiasm, and part of me says that's a little alarming," Lee said on "Closing Bell."