Penny Stocks
In the United States of America, a penny stock, also known as a micro cap equity, refers to a share in a company which trades for less than $5.00. While this is the official definition, and is used by the US Securities and Exchange Commission, generally every full service or discount broker, and the vast majority of analysts and institutional investors, there are other more loosely held criteria applied by the general public and most retail investors. In other countries the term may be used differently, without reference to US institutions.
Some of these alternative criteria include:
While such definitions are sometimes used by individuals and retail investors, the various and loose unconventional definitions enjoy no consensus or accuracy.
As well, there are many limitations with the alternative definitions, as they often contradict themselves. For example, there are many companies trading for only a few cents with market capitalizations of hundreds of millions of dollars, or corporations trading on the Pink Sheets but having share prices of $50 or more.
Some of these alternative criteria include:
- a price per share being less than $1, and as low as fractions of one cent
- a market cap of less than $50 million or less than $25 million
- trading on more obscure markets, such as the Pink Sheets
While such definitions are sometimes used by individuals and retail investors, the various and loose unconventional definitions enjoy no consensus or accuracy.
As well, there are many limitations with the alternative definitions, as they often contradict themselves. For example, there are many companies trading for only a few cents with market capitalizations of hundreds of millions of dollars, or corporations trading on the Pink Sheets but having share prices of $50 or more.
