Penny Stocks in the United States parlance stands for the same stock that trades at less than five bucks a share. These stocks are traded non-prescription (OTC) utilizing quotation services – OTC Bulletin Board (otcbb) and Pink Sheets. It is declared Penny Stocks are thinly traded but looking at share volumes traded it can be seen that volumes stand at a huge selection of millions for a sub penny stock. It’s really hard to find authentic information regarding companies that have penny stocks. Yet another factor is that this stock can be easily manipulated.
In the American financial market Penny Stocks are all those stocks which are being traded outside the major exchanges including the NYSE, NASDAQ or AMEX. Often best penny stock alerts are disapproved and considered pejorative. The definition of a penny stock in official jargon is – “a inventory which is a reduced priced speculative security of a tremendously small company” – regardless of whether market capitalization is there or not and if it is trading on a securitized exchange like NASDAQ or NYSE or even in OTC like OTCBB/ Pink Sheets.
Penny stocks can also be recognized by other brands like micro-cap stock/ small caps/ nano caps therefore on. These names are utilized inter changeably. It’s to be noted that according to SEC definition the status of penny stocks is decided based on share price instead of by marketing capitalization or the stocks’ listing service. A penny stock is normally listed for prices below 5 dollars for just one share. Traditionally shares that trade at 41 or less per share are called penny stocks but as per SEC characterization it is five dolars.
In the United Kingdom market penny stocks are labeled as penny shares. They refer to stocks and shares in little cap companies – which are determined as businesses with market capitalization under 100 million pounds and/ or perhaps cost of a share at less than a single pound and getting a bid/ provide spread of more than ten %. FSA – Financial Services Authority in the UK – issues chance warning as part of typical regulation on penny shares.
There are numerous investors that are brand new in the market or even novices are attracted by the penny stocks since they’re low priced and they’re seen to have potential for fast future growth. This perception happens when the stocks are going to be promoted avidly. But if investors are not careful they can have severe losses as it is well-known that many penny shares have lost almost all their significance in the long run. The penny shares have less liquidity, there is no formal financial reporting and the company is fraught with fraud. Because they don’t have liquidity these stocks are not hard to manipulate. Similarly sudden demand or even supply changes in penny shares can cause volatility in stock prices. Requirements to get quoted at OTCBB are minimum only. That is the reason SEC warns that such stocks are in the high risk investment class and also ensures that new investors know all of the risks involved.