Jim Cramer says investors should wait and see with Birkenstock’s IPO

CNBC’s Jim Cramer on Monday told investors they may be wise to sit out the “initial feeding frenzy” when German sandal-maker Birkenstock enters the market in an initial public offering on Wednesday.

Birkenstock is expected to attain a $10 billion valuation and is seeking to price shares at the top of its $44 to $49 range, Reuters reported. The company saw a bump in publicity this summer after its shoes had a cameo in the blockbuster hit “Barbie.”

“In the end, Birkenstock has a great product — one that even found its way into the incredibly popular Barbie movie — but you need to be very careful with its stock after the IPO on Wednesday,” Cramer said. “I worry that it’ll be too expensive right out of the gate and will only get more expensive in the initial feeding frenzy.”

Cramer warned it’s rarely a good idea to buy anything right after the IPO, but said that sentiment is especially true for Birkenstock, as it doesn’t need to underprice shares to get people interested.

While Birkenstock has seen immense popularity in recent years, Cramer still wondered whether the company is a fad or has true lasting power. But with that said, he added the company has seen solid growth and profitability, and its margins seem headed in the right direction.

Cramer also pointed out that much of the company’s shares are spoken for, with big ticket investors like a company associated with luxury goods giant LMVH and a Norwegian hedge fund reported to be buying up around 42% of the shares up for sale.

“Lots of IPOs have had hot starts, but that almost always ends badly for the people who buy the stock in the open market with a market order,” he said. “If you can get a piece of the actual deal, of course, that’s another story, but if you’re just buying like everybody else in the open market, I think you’re going to get absolutely pummeled. I say you’ll be better off on the sidelines and waiting for the stock to cool down, because it probably will.”

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