CNBC's Jim Cramer said Robinhood's public debut next week will be a real test for the sustainability of the retail trading boom and the meme stocks. "There's going to be a Waterloo or, let's just say, a great victory with what comes with this Robinhood deal," Cramer said on CNBC's "Squawk on the Street" on Thursday. The millennial-favored stock trading app — which is seeking a market valuation as high as $35 billio n in next week's initial public offering — plans to reserve 20% to 35% of its IPO shares for its own retail clients. Historically, these shares have been set aside for Wall Street's institutional investors or high-net worth individuals. While Robinhood is trying to help its clients, Cramer said its efforts could backfire. "Robinhood is giving far more than usual to its customers. If Robinhood opens down, do its customers buy more? I think they sell," said Cramer. "So Robinhood could be the test of the real craziness of this market." Speculative trading activity exploded this year, partially due to the rise of retail trading. Day traders in online chatrooms managed to create massive short squeezes in names like GameStop and AMC Entertainment , which inflicted huge pain for short sellers and jolted volatility in the overall market. Shares of GameStop and AMC are still up 877% and 1,776% in 2021, but well off their highs. Yet Robinhood CEO Vlad Tenev continues to lower the barrier for clients to gain access to more, historically exclusive, financial products. "Vlad's breaking all the rules. He's going to give a lot of people stock that [they] may not know what to do," added Cramer. "Will they hold their AMC? Will they hold their GameStop? Will they continue to buy these little $3 stocks?" Other analysts have said Robinhood's decision to democratize its IPO could expose the free-trading pioneer to the whims of the very amateur investors it's trying to help. Robinhood has also scheduled an unconventional roadshow over the weekend. The company is planning to stream its roadshow at 3 p.m. ET Saturday.
Scott Mlyn | CNBC
CNBC's Jim Cramer said Robinhood's public debut next week will be a real test for the sustainability of the retail trading boom and the meme stocks.