CNBC’s Jim Cramer warned investors that the market could be in trouble in the near term as it faces a massive supply of stock and a shortage in demand from buyers.
“Between the IPOs and the big SPAC attack and the big secondaries, we’re being flooded with stock right now, so the market’s going to struggle until Wall Street turns off the spigot,” the “Mad Money” host said Monday. “Unfortunately, there’s no sign of that happening yet, so you have to keep being careful.”
With more than 100 initial public offerings so far this year, first-quarter fundraising in U.S. markets has reached a record, Cramer said. Several new IPOs are in the pipeline this week. High-profile companies such as cryptocurrency exchange Coinbase and trading app Robinhood also plan to go public soon.
The market has also seen rising interest in companies choosing to go public through special purpose acquisition companies, widely known as SPACs. This year has seen more SPAC offerings executed than in all of 2020, Cramer noted.
“You can tell that there’s too much supply because many of these deals have started to fizzle,” Cramer said. “These special purpose acquisition companies just keep coming, even though the whole SPAC ecosystem’s falling apart.”
Cramer also warned about the new supply of stock through secondary offerings. He noted home-insurance provider Lemonade, decking company Azek and media conglomerate ViacomCBS have issued billions of new shares in recent months.
This has created a supply demand imbalance in the market. There aren’t enough buyers putting money to work and scooping up the slate of new shares being traded, Cramer noted.
“With all this new supply, it’s no wonder the fast-growing tech stocks can’t find a bottom,” he said. “We need to digest … all of the excess shares [and] that takes time.”
The market is being flooded with a supply of stocks and the issue is not getting the attention it deserves on Wall Street, CNBC’s Jim Cramer said Monday.
The stock glut, driven by multiple factors, is the most important market story right now and is another condition stunting stocks from gaining traction, he said on “Mad Money.”