Wall Street needs to see more mergers and acquisitions come through before the “coming onslaught” of initial public offerings jams up investing capital, CNBC’s Jim Cramer said Tuesday.
Major U.S. indexes traded strong out the gate Tuesday, but gave up most of their gains before the close. The Dow Jones Industrial Average added more than 140 points in Tuesday’s session. The S&P 500 and tech-heavy Nasdaq both gained about 0.70 percent.
“I think part of it is that we’ve got too many stocks,” the “Mad Money” host said. “So with a bunch of new IPOs on the horizon, the market won’t be able to handle all the supply. And when supply outstrips demand, prices go lower.”
Lyft will list on the Nasdaq Friday. AirBNB and Uber plan to go public this year, and Slack, Palantir, and WeWork could join the fray as well.
Cramer predicted FAANG stocks would fall under pressure if there is not enough money to go around. The FAANG group includes Facebook, Apple, Amazon, Netflix, and Alphabet‘s Google.
“I think the FAANG stocks will be used a source of funds,” he said.
But big tech is not the only sector that the host is worried about. He said the oil, cloud, health care and transports sectors, among others, are too crowded and need some consolidation.
“I wouldn’t be this concerned about the lack of mergers if I weren’t so worried about the coming onslaught of IPOs,” he said. “If money managers want to participate in these deals—and they will—they need to sell stocks that they already own to raise money … and that’s gonna put pressure on the whole market.”
Below are some potential deals that would get Cramer excited:
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