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Penny Stocks

Penny stocks are speculative, low-priced stocks that generally trade on the over-the-counter markets and pink sheets. [The pink sheets provide the listings, the quotes (bid and ask) of the lower-priced, thinly traded over-the-counter domestic stocks and foreign stocks.]

Penny stocks are low-priced stocks ($1 or less) in companies whose future operations are in doubt.

Additional Comments:

"Boiler room" (illegal) sales operators have promoted some penny stocks by cold calling unsophisticated investors on the telephone to stress how much money they could make by buying these low-priced stocks. Penny stocks are also heavily promoted in stock spam. To paraphrase the old saying, “There are no free lunches on Wall Street.

If a share is trading at 25 cents per share, it is probably trading at its fair value and for good reason. If the stock goes up to 50 cents, an investor makes a 100 percent return; if the company goes out of business, the investor loses his or her entire investment.

Related Terms:

Bulletin Board Shell
A blank check or shell company whose securities trade on the Over-the-Counter Bulletin Board. ...

Value Stocks
Value stocks are stocks that have lower prices relative to their fundamental values (growth in sales ...

Growth Stocks
Growth stocks are issued by companies expected to have sustained high rates of growth in sales ...

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