Definition of a Penny Stock

AlfredSokol said: "I hear the phrase bandied about quite a bit. So let's take a look at how the term "penny stock" is defined by the [url=http://www.law.uc.edu/CCL/34ActRls/rule3a51-1.html]SEC[/url] You'll have to read the whole thing. It's not based on market cap or on what exchange (or not) it's listed on. But here it is in a nutshell from the [url=http://www.sec.gov/answers/penny.htm]SEC page[/url] [quote]The term “penny stock” generally refers to low-priced (below $5), speculative securities of very small companies. While penny stocks generally trade over-the-counter, such as on the OTC Bulletin Board or in the Pink Sheets, they may also trade on securities exchanges, including foreign securities exchanges. In addition, penny stocks include the securities of certain private companies with no active trading market.[/quote] Here's a warning about the internet and Penny Stocks from [url=http://en.wikipedia.org/wiki/Penny_stock]WikiPedia[/url] that explains what the "Pump and Dump" is: [quote] "A company's web site may feature a glowing press release about its financial health or some new product or innovation. Newsletters that purport to offer unbiased recommendations may suddenly tout the company as the latest "hot" stock. Messages in chat rooms and bulletin board postings may urge you to buy the stock quickly or to sell before the price goes down. Or you may even hear the company mentioned by a radio or TV analyst. Unwitting investors then purchase the stock in droves, creating high demand and pumping up the price. But when the fraudsters behind the scheme sell their shares at the peak and stop hyping the stock, the price plummets, and investors lose their money. Fraudsters frequently use this ploy with small, thinly traded companies because it's easier to manipulate a stock when there's little or no information available about the company."[/quote] The [B]unwitting[/B] investors then get screwed. So, don't be [I]witless[/I] when it comes to investing. So keep it in mind. Just about any stock under $5 is now considered highly speculative and to be a "Penny Stock" by the SEC. Discuss please."

thezster said: "The definition works for me. There are, in fact, some good companies out there trading for under $5/share - and I have no problem discussing them in any forum. My issue comes when people simply post things like "Going higher any day now"... "Great time to get in".... "Don't miss the boat".... with no valid rationale for doing so. Trying to buy/sell based on timing - volume trends - or voo doo..... is strictly gambling. If you want to push a low priced stock - put some reason to inform others (debate) - rather than entice them (pump)....."

AlfredSokol said: "Of course. Because such small floats are the only ones that can actually be manipulated with small amounts of people. Try moving a company with a market cap of $75 Billion by saying "its going to the moon" It won't happen."

thezster said: "[QUOTE=AlfredSokol]Try moving a company with a market cap of $75 Billion by saying "its going to the moon" It won't happen.[/QUOTE] It might if they manufacture rockets and have a new contract pending with NASA.... :th_dblthumb2:"

AlfredSokol said: "True enough. I imagine once in a blue moon one of these companies actually does find undiscovered oil or a cure for a disease. It happens about as often as being struck by lightning, but you never know :)"

ratAphooey said: "I remember when it used to be stock under $1. I wonder why they changed it."

Cryogenix said: "Ahh...thanks for the enlightenment. I always assumed a penny stock was anything trading under a buck. I've seen plenty of sub-$5 stocks go well beyond the $10 range. Not all are garbage."

Lagg-Alot said: "I wish that this section was here about 18 months ago before I lost $5,000 on penny stocks "pump and dump". And I still have the 3 losers in my portfolio. One of them has potential, but I am eating dirt on the other 2 :("

thezster said: "[QUOTE=Lagg-Alot]I wish that this section was here about 18 months ago before I lost $5,000 on penny stocks "pump and dump". And I still have the 3 losers in my portfolio. One of them has potential, but I am eating dirt on the other 2 :([/QUOTE] ahhh, short memory... it was here 18 months ago... full of pumping and dumping..... (Plasticon ring a bell?)....... There was a time when penny stocks were all the rage and it was hard not to make $$ on them (dot com era)... but today, they are what they are.... worse odds than roulette.... To an earlier post.. Microcaps is simply a fancy term for pennies.... since they went out of vogue - somebody decided this term had more panache.... LOL what a F'in Joke!"

Rickster said: "One look at the big banner at the bottom of the page and it is obvious why the penny stock forum is open for business."

thezster said: "ouch.. good point... and I had thought it was because Darren attended a seminar on "Give em what they want"....."

Mr. Gekko said: "To me, a "penny stock" is anything below [B]$2[/B]. But, if the SEC says $5, I guess it's $5."

LongArm said: "[QUOTE=thezster]To an earlier post.. Microcaps is simply a fancy term for pennies.... since they went out of vogue - somebody decided this term had more panache.... LOL what a F'in Joke![/QUOTE] Actually "pennies" refers to price, and "microcap" refers to market cap. Some pennies are microcaps, but more are nanocaps (under $50 million in market cap). And there are many microcaps that aren't pennies. Many microcaps have share prices in the 10s, 20s, 30s, 40s and up. So even though many people tend to use these terms interchangeably, technically, they're two different things."

Pb3190 said: "And here comes LA again... Thanks for, as usual, correcting us on market terms, as well as the very rare grammar slip up. Rare, yea right :laugh:"

Mr. Gekko said: "[QUOTE=Rickster]One look at the big banner at the bottom of the page and it is obvious why the penny stock forum is open for business.[/QUOTE] That's actually the way Google Ads works. It indexes words on the page and places ads that are related."

Mr. Gekko said: "[QUOTE=Pb3190]And here comes LA again... Thanks for, as usual, correcting us on market terms, as well as the very rare grammar slip up. Rare, yea right :laugh:[/QUOTE] Who needs a text book when ya' have LA. :)"

LongArm said: "[QUOTE=Pb3190]Thanks for, as usual, correcting us on market terms, as well as the very rare grammar slip up. [/QUOTE] Aw, c'mon...I let 99.97% of the grammar slip-ups go. ;)"

ratAphooey said: "i definitely think it is important to have our terms straight. i used to buy "penny stocks" all the time because i thought they were about emerging technologies. companies like "metromedia", "xo communications", "exodus hosting" and "level three". all were junk but had high market caps at one point. i didnt do that hot with them tbh."

Mr. Gekko said: "[QUOTE=ratAphooey] i used to buy "penny stocks" all the time because i thought they were about emerging technologies. companies like "metromedia", "xo communications", "exodus hosting" and "level three".[/QUOTE] Actually, I think LVLT is a good range trade. Of course, buying at the wrong time can be disastrous with this one."

ratAphooey said: "There are actually quite a few "quality" companies trading for very low now. But the real question is will they go up. My best ever cheap stock was USG. I made 10X on that one. If I wouldve held it would been closer to 100X!"