Coinbase IPO will be volatile
Coinbase will trade for the first time on a public exchange on Wednesday. The timing of the IPO coincides with bitcoin trading near historical all-time highs of above $63,000. As such, shares are likely to soar as soon as it starts trading given the “tremendous appetite” for investors to gain new forms of exposure to the relatively new asset class that isn’t going away.
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In an ideal scenario, investors should look to be buyers of Coinbase’s stock at less than $475 per share, Cramer said. This would represent nearly double the reference price of $250 per share that was assigned on Tuesday.
Cramer said he is concerned there would be so much initial demand to buy the stock it will “soar to ridiculous levels” within seconds. The major problem with this scenario is company insiders are free to sell their shares right away since there is no lock-up period.
This could result in a sell-off and hurt traders and short-term investors. But long-term investors can take advantage of any weakness because Coinbase is a stock to own for the long-haul.
Regardless of how the opening trade plays out, investors should be “get ready for the bumpiest ride of your financial life” and then prepare to buy additional shares on any weakness.
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Don’t expect to buy $300 a share
Coinbase’s stock in the low $300 level would offer investors good value as it implies a multiple of 10-time sales, Cramer said. This scenario “seems unlikely” but buying the stock at a higher price tag and a multiple of 15 times sales is “not unreasonable.”
Cramer said $475 per share represents the maximum price he would be willing to pay for the stock.
Also important to keep in mind is Coinbase’s IPO is one of many other offerings in the tech space. So if shares become too expensive it could further add to the broader problem of the scarcity of tech growth stocks.
Patient investors should “eventually” be able to get in the stock at a good price, Cramer concluded.