Penny Stocks - The Price And Market Capitalization

When we are talking about the penny stocks we can describe them as stocks that have very low value, highly speculative stocks, unlisted on the stock exchange, and with small market capitalization. If a stock has any of these it can be called penny stock.

Penny stocks does have very low value. But, it is very difficult to say how low the value should be for some stock in order to be described as penny stock. There are a lot of opinions about the price of the stocks.

Penny Stocks Have Low Value

So, in general, if the price is really low then we are talking about penny stocks. Some says that the stocks with a price below $5 per stock are penny stocks. Other people are saying that all stocks with value below $3 are considered as penny stocks. And also there are some other people which claim that a stock is penny stock if its value is below $1.

Penny Stocks Are Not Listed On The Stock Exchanges

Penny stocks are also not listed on the stock exchanges. Because of this, penny stocks are highly speculative and they bring you higher risk when investing in them. The risk is higher because if a stock is listed then there are some regulations that the company must satisfy. And, the penny stocks which are not listed do not meet the regulation. They are simply sold outside the stock exchange and the investors can be very cautious about them.

Penny Stocks Have A Low Market Cap

Another consideration of penny stocks is its market capitalization. Market capitalization is market value of a single stock from a certain company multiplied with the number of all stocks issued by the same company and can be found on the market. For example, if some company has issued 10,000 stocks and market value of the stocks is $10 than we can calculate market capitalization of 100,000.

So if some stock has market capitalization below $300 million than it is considered as penny stock. And if market capitalization of some stocks is below $50 million they can be considered as nano-cap stocks.

Penny Stocks Are Highly Speculative

In the previous example the stocks from the company can be considered as penny stocks because the market capitalization is below $300 million. They are also nano cap stocks although the price is not lower than $5. We should also state that there is high risk in investing in these stocks. They are not under regulatory control of stock exchanges, although the SEC does oversee their trading. These are highly speculative and this is why they are avoided by most conventional stock market investors.

Readers’ Forum: Jan. 2, 2009 - Terre Haute Tribune Star

Readers’ Forum: Jan. 2, 2009 Terre Haute Tribune Star, IN - Jan 1, 2009 It will be worth every penny and minute of your time. Thank you again Brian, Kenny, Mike and Chris. I would like to comment on the recent letter written by ...

Good Life China Corporation (GLCC) Logistics Candidate Update - FOXBusiness

Good Life China Corporation (GLCC) Logistics Candidate Update FOXBusiness - Jan 2, 2009 ... requires financial institutions or brokerage firms to provide their clients with documentation, describing the risks of investing in penny stocks.

Hits and misses: Retiring fire and police chiefs, Joel Lefever ... - HollandSentinel.com

Hits and misses: Retiring fire and police chiefs, Joel Lefever ... HollandSentinel.com, MI - Jan 2, 2009 Even Perrigo, whose niche as a maker of store-brand health-care products should put it in good position in penny-pinching times, was off 7.7 percent for the ...

Vucicevich arrest derails Colchester dreams - Financial Post

Vucicevich arrest derails Colchester dreams Financial Post, Canada - Dec 17, 2008 "I've seen this happen lots of times," says Janice Shell, an art historian and a veteran observer in the US of penny stock scams after she got burned by one ...

Madoff: Reflections and Reactions - Advanced Trading

Madoff: Reflections and Reactions Advanced Trading, NY - Dec 12, 2008 But this same source wonders how the firm made money after decimalization was implemented in 2001 and spreads shrunk to fractions of a penny. ...