Stocks with market price below 1 unit of the local currency are called penny stocks (although it is not uncommon for stocks up to $5 to also be referred by this name). These are often rather inactive, small-cap stocks. Due to their small-cap and illiquid nature, at times they can be speculated to high volatility. A stock, also referred to as a share, is commonly a share of ownership in a corporation. ... Market capitalization, often abbreviated to market cap, is a business term that refers to the overall value of a companys stock. ...
Penny stocks are also sometimes referred to as house stocks. A house stock is commonly referred to as a stock that the management of a brokerage firm has instructed all brokers working for him to promote. ...
In the United States, penny stocks can be traded outside formal exchanges (e.g. NYSE, Nasdaq) on the OTCBB (Over the Counter Bulletin Board). New York Stock Exchange (June 2003) The New York Stock Exchange (NYSE) is one of the largest stock exchanges in the world. ... NASDAQ MarketSite (Times Square, New York City) at night NASDAQ (originally an acronym for National Association of Securities Dealers Automated Quotations) is a U.S. electronic stock exchange. ... Over-the-counter trading (OTC trading) is the trading of financial instruments such as stocks, bonds, or derivatives directly between parties and not through futures or stock exchange (such as the NYSE, NASDAQ, or CBOT). ...
On 25 July 2002, the Hong Kong Stock Exchange and Clearing Ltd. announced that they were looking into new policies to delist penny stocks with market price below HK$0.50. The consultation period was supposed to end on 31 Aug 2002. On 26 July, local penny stocks started a panic slide after 10.45am. Among 370 penny stocks with market price below HK$0.50, 283 (76%) fell. In one day HK$10.9 billion was vapourized, which was equivalent to 10% of the market cap of eligible penny stocks. 2002(MMII) is a common year starting on Tuesday of the Gregorian calendar. ... The Hong Kong Stock Exchange (SEHK) is the stock exchange of Hong Kong. ...
The terms pennystocks, microcap stocks, small caps, and nano caps are also all sometimes used interchangeably, although market capitalization is not a good definition of whether an equity should be termed a pennystock.
Pennystocks are considered high risk investments and new investors should be aware of the risks involved.
Pennystocks are often used in a number of fraudulent schemes, from pump and dump, short-and-distort, and selling chop stocks -- issues acquired for pennies under Regulation S and then illegally sold to retail investors.
Of course, the stock slips from 9¢ to 6¢ but that is of little consequence--he knows he's gotten in near the bottom and nobody hits the exact bottom anyway.
The stock has a 5 for one reverse split and he celebrates the fact that he sold his remaining little stake at a 75% loss instead of the 95% loss that would happen just a week later.
He buys a 2¢ stock because he knows that the shell alone of any pennystock is worth 2¢ a share for companies trying to avoid the hassle of starting a corporation from scratch.
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