Jim Cramer Warns of Stock Overvaluation After Medline IPO’s 41% Surge
- 2 days ago
- 3 min read
The financial world witnessed a significant event this week as Medline, a medical supplies company, successfully executed the largest IPO in over four years globally. The market debut on Wednesday, December 17, 2025, saw the stock soar by more than 41 percent immediately. The company was able to raise $6.26 billion in funds, and the stock opened at $35, dramatically higher than its initial pre-pricing value of $29. Yahoo also reported the stock's 41% "pop" to $41 after raising $6.3 billion.
By all measures, the Medline IPO "generally went pretty darn well," according to CNBC’s Jim Cramer. Yet, the enormous first-day enthusiasm quickly turned into a cautionary tale regarding valuation. Cramer immediately voiced concern that the stock looked "a little too expensive" for him. This assessment aligns with broader market observations, including Bloomberg's, which noted the 41% jump and concurrent stock overvaluation concerns amid private equity sales and debt load.
Cramer’s primary alarm bell stems from the current trading multiples. He estimates that given the current share price, the stock is trading at roughly 45 times his back-of-the-envelope earnings estimates. He deems this ratio "a lot" for a company that generally exhibits low double-digit revenue growth. For many investors, chasing such a substantial first-day move is a high-risk proposition.
While Medline is lauded for being "solidly profitable" and exhibiting strong revenue growth in recent years, Jim Cramer highlighted several significant structural challenges that contribute to the stock overvaluation risk. The company’s CEO, Jim Boyle, has positioned Medline as the "Costco in the healthcare field," utilizing a membership model and selling its own branded products. The business model is sound, splitting revenue evenly between surgical product sales and managing the supply chain for the industry. However, Medline’s balance sheet is "not ideal," and the company is under pressure to pay down its substantial debts. Although the debt load is manageable, it remains a factor.
Furthermore, Cramer pointed out the shareholder structure. The majority of shareholders, who also wield most of the voting power, are the private equity firms that acquired the company prior to the IPO. These private equity firms are expected to "ring the register"—meaning they will cash out their positions sooner or later. Cramer noted that while this selling won't be an immediate short-term issue, it creates a definitive "ceiling" on the stock longer-term until the private equity positions are fully liquidated.
Due to these factors, Jim Cramer strongly advises caution. He stated he would only consider purchasing the stock if it drops back down to the $29 or $30 range, emphasizing that he does not want to "chase it after this huge first-day move". The lesson from the Medline IPO is clear: enthusiasm is not always equivalent to value, and investors must distinguish between initial market excitement and sustainable stock overvaluation.
The initial surge of an IPO stock, like Medline's 41% jump, often acts like a flash flood: while exciting and fast-moving, it pushes prices far beyond their comfortable banks, leaving behind a valuation that may require a significant pullback before prudent investment can safely take place.
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Medline IPO
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