CNBC’s Jim Cramer Warns Against Getting Greedy in Hot IPOs, Suggests Taking Profits
CNBC’s Jim Cramer is urging investors to remain grounded and not get caught up in the exuberance surrounding hot IPOs, particularly Reddit, whose valuation has risen significantly. Cramer noted that Reddit’s stock is up over 200% since its first post-IPO quarter in May and while he’s a big fan of the company’s unique place in the digital advertising landscape, he thinks the valuation is starting to feel “a little excessive.”
Cramer suggested taking profits in stocks that have doubled, tripled, or quadrupled, adding that it’s difficult to justify the high valuation. He noted that many recent IPOs, including LandBridge, Astera Labs, Loar, and American Healthcare REIT, have seen their stocks run up this year.
The scarcity value of these hot IPOs is due in part to the difficulty for companies to go public. Cramer explained that many companies can raise capital privately without the scrutiny of the public markets, making it harder for new companies to debut.
Cramer believes that when more IPOs do start to debut on the market, investors will start to sell their shares in the top-performing IPOs to raise capital for the next big deal. However, he notes that a new IPO cycle is unlikely to hit the market anytime soon.
The Mad Money host concluded by saying that while taking profits may mean missing out on potential gains, it may also spare investors from huge losses if the market takes a hit and the hot IPOs cool down dramatically.