CNBC’s Jim Cramer flags that there is a “rude awakening” from Uber and other looming stock lockup expirations coming to Wall Street. The “Mad Money” host sounds the alarm that Wall Street should prevent Chinese companies from going public in U.S. markets. Later in the show he urges viewers to take advantage of Twitter’s pullback and checks in with Zebra Technologies CEO Anders Gustafsson to get an update on how the electronics company is mitigating tariffs on Chinese imports.
Look out for lockup expirations — more supply will overwhelm the market
Beyond Meat CEO Ethan Brown (C) celebrates with guests after ringing the opening bell at Nasdaq MarketSite, May 2, 2019 in New York City.
Drew Angerer | Getty Images
CNBC’s warned on Tuesday that Wall Street could have a “very rude awakening” because the expiration of stock sales restrictions following IPOs will soon lead to a deluge of equities on a market with little investor appetite.
Following an initial public offering, major shareholders and company insiders are not allowed to sell shares in the company for a specified period.
The “Mad Money” host pointed out that the stock lockup on insider trading for several recent IPOs are expiring, which means that those shares will be authorized for trading on public markets. That’s in addition to other initial public offerings in the queue.
“When you have billions of dollars of stock entering the market without a natural home, you better believe the averages will come under pressure,” Cramer said. “These lockup expirations and IPOs [are] going to take their toll, unless a flood of new money comes into the stock market. I hope we can absorb them without too much pain, but hope is not part of the equation.”
China keeps pumping out junk IPOs — it’s time we say ‘no’
Feng Zhou, CEO of Youdao, rings the opening bell during the IPO of Youdao Inc. at the New York Stock Exchange October 25, 2019.
Brendan McDermid | Reuters
Youdao, a Chinese provider of online learning content and applications, debuted on public U.S. markets last week at $13.75. That was 22% below its $17 initial public offering, Cramer noted.
He chided that more “low-quality Chinese merchandise” will come public in coming weeks.
“The brokers who offer these are craven. The buyers are just plain stupid. The exchanges are a disgrace,” he said disapproving that officials, from the government to the SEC to banks to the exchanges, allow “junk IPOs” from China just for money.
“Why doesn’t [President Donald Trump] do something here? These Chinese companies don’t have to obey U.S. securities laws when they list here, which means we get tons of deals backed by sketchy financials,” Cramer said. “I wish someone would do something, but either way we’ve got a lot of supply coming and that’s not good for the stock market.”
Take advantage of Twitter’s shortcomings
The Twitter banner hangs at the NYSE.
Adam Jeffery | CNBC
stock has lost almost all its 2019 gains, and Cramer says the current share price will “prove to be a gift” in the long term.
After climbing above $45 in early September, the stock price has tumbled under $30, with 23% of those losses coming since its disappointing third-quarter earnings report Thursday.
“The last time this stock had a major meltdown, it found a floor of support at $27 to $28, which is one more reason to start buying right here at $29 and change,” Cramer said.
Zebra Technologies is moving operations out of China
Anders Gustafsson, CEO, Zebra Technologies
Scott Mlyn | CNBC
The Trump administration’s next planned tariffs, scheduled for Dec. 15, target consumer items such as toys, laptops and smartphones.
The electronics maker has already done that for products that were hit by earlier tariffs, Gustafasson said.
“We’re now moving to other Southeast Asian countries with our current partners and they’ve been replicating our lines,” he said on “Mad Money.”
Sell Baxter on accounting error
Source: Baxter International
Baxter International shares are down double digits since reporting its quarterly report for the third quarter last Thursday.
The mixed results, however, is not to blame for the negative action. Word about an accounting error in the medical technology supplier traced back to 2014 prompted an internal investigation and the stock to fall more than 10% that day, its largest single-day drop in nearly two decades, according to FactSet.
While the stock price is up more than 18% year-to-date, it has lost 11.6% of value since last week’s earnings report. Cramer called it a “slow and steady grower,” but those accounting issues mean the equity must be sold.
“Eventually I think you can buy this one into weakness, we just aren’t there yet. Either Baxter needs to come down some more or we need to get more clarity on the situation,” Cramer said. “Until then, I’m urging you to stay on the sidelines or wait things out maybe in a cleaner medical device story like Abbott Labs … that will let you sleep a little more soundly.”
Cramer’s lightning round
In Cramer’s lightning round, the “Mad Money” host zips through his thoughts about callers’ favorite stock picks of the day.
CVS Health: Buy. “I see this stock going to $80 by year-end.”
: “We’re going to stay away from that one.”
General Electric: “GE’s tomorrow morning’s business. We will know in 12 hours how GE is. … I expect absolutely nothing great from this quarter because it’s an entirely a redo, reset year. We have to give [CEO] Larry Culp at least 6 more months, and so expect nothing great.”
Disclosure: Cramer’s charitable trust owns shares of CVS and Abbott Labs.