Market falls due to flurry of IPOs and SPACs in 2021
CNBC’s Jim Cramer on Tuesday lamented the flood of companies going public in 2021 through traditional IPOs and SPAC deals, suggesting it plays a role in Wall Street’s weak start to the new year.
“These new stocks and SPACs are killing us right now. This oversupply is pulling the rest of the market down,” the Mad Money host said, explaining his belief that the weakness is not just caused by investors reassessing valuations across the market. board.
“The stock market is like any other market, if you have too much inventory, prices will plummet,” added Cramer, who claimed the current momentum reminded him of the dot-com boom and bust cycle of the late 1990s and 2000s. He said this has implications for many great companies that have been public for years.
“I want to believe that many of the 600 IPOs last year are better than the 300 we got in the dot-com era. But recent action tells me that’s not the case,” Kramer said. “These failed IPOs have emptied the pockets of investors and now they are tired of losing, but they are selling their winners to fund over-publicized losers instead of taking the hit that has actually already been taken for them.”
Kramer acknowledged that reputable firms such as Netflix have been reporting “junk” for quarters. However, he said that, in his opinion, it is for the most part widely applied to unprofitable, new public companies and “real companies” with real incomes.
For example, “Last night, IBM reported its best quarter in 11 years; its shares have not changed [because] everyone is so negative,” Kramer said. “Then Wall Street comes to life. IBM is roaring,” he added, ending Tuesday with a 5.65% gain.
American Express and Johnson & Johnson are two other vetted companies that reported Tuesday, and their stocks reacted similarly to IBM, Cramer said.
“If you look at… real companies with real earnings that have reported so far, there are actually more winners than losers,” Cramer said. “It’s amazing considering I can’t even find 15 good companies out of the 600+ businesses that went public last year.”
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