Penny Stocks are the micro cap stocks with a low per stock value. The definition of these stocks varies for different people and is generally understood as the stocks with low value. Penny stocks fulfill the market criteria to a certain level and hence, they are not included on major stock exchanges. Instead, these are in pink sheets or OTCBB. PS is a risky investment and can potentially help in getting huge earnings, but only if they are chosen properly.
Understand Market Capitalization
Penny Stocks have the commonly used term ‘Market Capitalization’. Market cap is the total worth of a company. For example, the company floating 10 million shares with $4 value per share will have the market capitalization of $40 million. The greater number of outstanding shares will correspond to higher stakes. If a large amount of money is involved in a certain penny stock, the control is usually lost. The regulatory controls for penny stocks are quite mild and can be hampered soon.
Pricing of Penny Stocks
Penny stocks can be bought at different pricing, but it is always below $5 per stock. You can purchase the PS below the cut-off price. Some investors consider that the stocks below $5 are included in penny stock listings and others make the mark below $1. In terms of market capitalization, the stocks with a market cap below $300 million are penny stocks and there are many companies included in the listing. Read more on penny stocks listing at /why-do-you-need-penny-stock-listing/
Nano cap stocks are volatile in nature and their value is different in various phases. It is necessary for the investors to make the worthy investments and invest in penny stocks, which can generate more money for exploratory activities. There are many companies, which have actually gained higher positions with consistent growth and have better scope in sense of getting towards major stock exchanges.
There is no ethical millionaire made through penny stock trading and small-cap companies can become bankrupt with no good criteria followed. Penny stocks have been around for past many decades and provided a lot of opportunity to the small investors to gain higher ROI.