CNBC's Jim Cramer told investors to tread carefully when it comes to Cava, the fast-casual restaurant chain that's expected to go public this week.
. The former jumped on its IPO day, going from $49.56 to $56.20, only to plunge to $6.10 and never come close to its highs, trading at around $10 on Tuesday. Chipotle, on the other hand, has grown 9,290% from its initial offering and is one of the highest-performing restaurant stocks.
Cramer also warned investors about the pitfalls of the IPO market in general, with most following a similar cycle. First, underwriters tempt investors with quality merchandise at low prices. As they gain traction, companies start putting out lower-quality commodities that hyped-up buyers continue to purchase. Eventually, Cramer said the market becomes "flooded with garbage," only to eventually collapse.
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