Even though the IPO market is heating up, CNBC's Jim Cramer says it's been hit or miss so far. He urged investors not to buy Amer Sports, which debuted at a discount on Thursday, because the company has a poor balance sheet.
“So far it looks like another out-of-favour IPO, although the low price has allowed the stock to get a like, I guess you could call it a decent bounce,” he said. “And I have to tell you, Amer Sports is a great example of the kind of deals I wish we didn’t see.”
The company is known for a number of popular sports brands, including Wilson and Arc'Teryx. The stock opened at $13.40 per share, increasing its value to about $6.3 billion. The company had previously sought a valuation of up to $8.7 billion. Amer Sports is one of the few recent IPOs, along with Birkenstock and BrightSpring Health, whose debut fell short of Wall Street's expectations.
Cramer said Amer Sports' balance sheet is “not ideal,” with $2.1 billion in debt. He noted that the company's prospectus contained adjusted figures that assumed it would raise $1.6 billion, but the discount meant it could only raise $1.37 billion.
Cramer acknowledged that Amer Sports has seen decent growth in recent years, but much of that growth has come from sales in China. He said this kind of dynamic is not repeatable as it is due in large part to the end of lockdowns in the country. Cramer added that he is cautious about companies with heavy exposure to China because of the weak economy.
“Frankly, I think the bankers are playing with fire by trying to sell things like Amer Sports,” he said. “I just hope it doesn't completely poison the IPO. In other words, underwriters: Just say no.”
Comments are closed.