CNBC's Jim Cramer said he is growing concerned about the speculative nature in the IPO market.
CNBC's Jim Cramer said Friday he is growing increasingly concerned about signs of speculative excess in the IPO market.
The "Mad Money" host warned he didn't want to "end up with another Cerebras," arguing that the highly anticipated debut of Elon Musk's SpaceX could fuel another wave of speculative buying.
SpaceX is expected to go public in June and could release its prospectus as soon as next week, CNBC reported Thursday. However, after the blockbuster debut of AI chipmaker Cerebras Systems on Thursday, Cramer said demand for shares of Elon Musk's rocket company could be even more intense.
Cramer noted that various media reports suggest the offering could value SpaceX — home to Starlink satellite internet, social-media site X, and the Grok chatbot — between $1.75 trillion and $2 trillion. While he said he understands investor enthusiasm around Musk and the company's businesses, he warned the stock could quickly become detached from fundamentals if underwriters release too few shares to the public.
"If SpaceX issues just a sliver of stock...this company could have a $5 trillion valuation," he said. "SpaceX would create a bubble unto its own," he said.
Cramer warned that it could be a precedent-setting event for other high-profile artificial intelligence companies such as OpenAI and Anthropic, which are considering public offerings of their own. A wave of massive technology IPOs could begin weighing on the overall market as investors sell existing holdings to raise cash to buy the new issues, Cramer said.
"Remember what I always say," he said. "The stock market, like any other market, is all about supply and demand. Too much supply and the market breaks down." Still, Cramer said the outcome will largely depend on how underwriters structure the deal, urging them to avoid engineering the type of explosive first-day pop that fueled speculative excess during the dot-com era.
"Hope the underwriters act responsibly rather than engineering the pops of a lifetime," he said. "They did the latter during the dotcom era and that ended horribly." Click here to read Jim Cramer's Guide to Investing at no cost to help you build long-term wealth and invest smarter Sign up now for the CNBC Investing Club to follow Jim Cramer's every move in the market.
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